Course change or temporary fix? Too early to say, but suddenly the financial markets are under the fury of selling and the return of old fears, especially in the Eurozone. But the contagion threatens the entire global economy.
In Milan, the FtseMib index lost 2,7%. The stock exchanges of Paris and Frankfurt fell by 2,1% and 2,5% respectively, Madrid -2,6%. The Athens Stock Exchange, epicenter of the European earthquake, closed down by 3,8%.
The decline of Wall Street was also less strong but sensitive: the Dow Jones index fell by 0,79%, the S&P 500 by 1,08% and the Nasdaq slipped by 1,55%. Apple lost 2,1% on the stock market. Asian stock exchanges were also weak, despite Tokyo closing in positive territory (+0,06%).
THE 1,8-YEAR RETURNS TO XNUMX%, QE LEAKS
The bull was triggered by the fury of the bond market sales, which erased most of the gains achieved since March 9, the date of the first Qe purchases. Storm warnings for the eurozone were anticipated by pressure on the most solid pillar, the Bund. In just four sessions, the 0,517-year yield tripled to XNUMX%, on the levels at the beginning of the year.
Yesterday the barrage of Spanish BTPs and Bonos collapsed in the face of sales pressure. The yield on 10-year BTPs rose in the afternoon to 1,79% against 1,55% at the opening. The spread widened to 127 (+20 basis points). Values in line with those of the Spanish Bonos. Longer maturities lose out especially: the Btp 30 jumped to 2,88%.
Greece's yields signal default risk again: the two-year bond is back above 20%. US T Bonds are also under tension, rising yesterday from 1,92 to 2,20%.
CRUDE OIL AT HIGHEST SINCE DECEMBER
Another pillar of the global recovery is also failing: weak oil. WTI crude ended the day above $60 a barrel for the first time since last December. The contract in July - the most traded - advanced by 2,49%, at 60,4 dollars a barrel. Brent trades at 67,5 dollars with an increase since the beginning of the year in the order of 35%.
Various factors are supporting the prices: ongoing tensions in Yemen; in Libya, protests led to the closure of the port of Zueitina, which has the capacity to export 70.000 barrels a day; Saudi Aramco, Saudi Arabia's oil company, raised the prices of oil sold to Europe and North America (a sign of strong demand with refineries returning to operation after the seasonal maintenance phase). The turnaround has affected other commodities, especially copper and zinc.
GREECE, THE DEFAULT IS CLOSER
Among the causes of the landslide is the now palpable threat of Grexit. The European Commission has revised its estimates for the Greek economy downwards. The Monetary Fund, according to the Financial Times, has launched a sort of ultimatum: either the issue will be tackled with a new aid plan for Athens, necessary to deal with the collapse, or the IMF will withdraw to avoid losses.
The threat was partially denied by the German Finance Minister, Wolfgang Schaeuble, who however increased the dose: the liquidity conditions of Greece "seem to become tighter and all scenarios are possible", he said at the press conference.
"The Eurogroup is unanimous in its desire to help Greece but that depends on Greece", added the German minister, who however acknowledged that the latest negotiating tables with Athens have become more constructive. In the evening, however, the Greek government announced that the impasse in the negotiations depends only on the disagreements between the IMF and the EU.
TRADE DEFICIT HOLDS BACK THE US RECOVERY
Sinister signals also come from the American economy. In March, the US trade balance recorded a deficit of 51 billion dollars (+43%) on levels not seen for six years, much more than economists' expectations.
The data sheds a disturbing light on the revision of GDP growth in the first quarter, already indicated at a meager +0,2%. The figure could be corrected downwards by half a point, according to some analysts, even if the services sector (two-thirds of the US economy) is growing.
The services sector in China also holds, albeit with a slight contraction signaled by the PMI index elaborated by the HSBC bank.
Yesterday in the morning the EU Commission has revised the estimates on the euro area, raising the forecast to 1,5% from 1,3% on 2015, up to 1,9% in 2016. The title of the report speaks of a recovery driven by a "stern wind". But for Italy, growth will only be "gradual": +0,6% for this year, +1,4% in 2016.
BANKS IN RED, BUT THE BAD BANK REVIVES SIENA
Few titles have escaped the collective landslide. Among these, Monte Paschi stands out, closing with a sparkling rise of 4,8% to 0,58150 euros. The impetus comes from the expectation, comforted by the words of Prime Minister Matteo Renzi, for the launch of a bad bank with public participation which could be conferred 100 billion euros of gross non-performing loans (approximately 30 billion the net value).
On the contrary, the rest of the sector suffered an initial setback from the drop in government bonds, Unicredit lost 3,7% and Intesa dropped by 3,2%, Ubi (-4,2%) and Pop.Milano (- 3,9%). Bad day also for Generali (-3,3%), demoted from Barclays to Equal Weight from Overweight. UnipolSai is not doing any better with a 4,8% drop
The quarterly results protect Banca Generali from the downturn, which gains 3,5% to 31,20 euros, after reaching new all-time highs of 32,10 euros in the morning. After the accounts Citigroup has decided to repeat the Buy, raising the target price to 33,50 euros from the previous 27,50 euros.
THE LEADERS OF EI TOWERS UNDER INVESTIGATION. MEDIASET LANDSLIDE
Heavy decline of Telecom Italia (-4,4%). The president Giuseppe Recchi confirmed that an agreement has been signed with Fastweb to develop the best technologies to bring the network speed to 100 megabits even using the optical fiber only up to the cabinet, then with copper.
Landslide also Mediaset (-4,6%). The subsidiary Ei Towers instead collapsed by 2,7%, to 53,75 euros, with a minimum of 51,80 euros after the news of the searches in the headquarters by the currency group of the Guardia di Finanza on the orders of the Milan prosecutors. The entire board of directors is investigated for insider trading in relation to the offer on Ray Way (-2,2%).
THE ANALYSTS COOL ON LUXOTTICA
Widespread reductions also in the luxury sector, starting with Luxottica (-3,8% to 58,05 euros), among the worst blue chips of yesterday. After the publication of the quarterly, the judgments of the brokers have arrived, mostly inspired by prudence. Raymond James has decided to cut the recommendation to Market Perform from Outperform. The target price is indicated at 53 euros.
Mediobanca remains Neutral with a target price of 54 euros. JP Morgan also reaffirms the Neutral judgment and raises the target to 52 euros from 50 euros. Kepler-Cheuvreux maintains the Hold, adjusts the target to 55 euros from 50 euros. Buy rating confirmed, however, by Nomura, which brings the target price to 60 euros from 56,60 euros.
The vast majority of analysts (70% of the Bloomberg consensus) consider the current price to be fair and have a Neutral recommendation. Only 16% still recommend buying. The average target price is now set at 57,2 euros, close to today's quotation.
Moncler (-3,1%) and Tod's (-2,1%) also fell.
CAR SALES PROTECT FCA
Fiat Chrysler (-0,4%) limited the damage thanks to strong growth in car sales in Italy in April. On the other hand, the retreat of StM continues, leading the decline in industrial stocks with a fall of 3,6%, followed by Cnh Industrial (-2,9%) and Finmeccanica (-2,8%).
