BTPs GO TO AUCTION AFTER BLACK WEDNESDAY. NEW ALTOLA' OF THE “TRIPLE A” COUNTRIES AGAINST MADRID
Madrid returns to the center of attention (and fear) of international finance. This morning the Spanish government will present the new plan to reduce the public deficit. It is obvious that among the measures that Prime Minister Mariano Rajoy will announce there will be reductions in social security, an issue that risks triggering strong street reactions and by trade unions while the separatist wave is growing in Catalonia where regional elections have been called with two years before the natural maturity. Even Greece, shocked by street protests, remains a hot front, with the International Monetary Fund which has sounded the alarm on the need for a new debt restructuring.
The tensions in Spain risk having their effects also on the most demanding auction of the Italian Treasury, today's one dedicated to BTPs and 5 and 10 year bonds. Meanwhile, the markets are wondering if the Draghi effect has already vanished. Yesterday's crash is the heaviest since last August 2, when the markets welcomed the outcome, still interlocutory, of the ECB directorate with a flood of sell-offs. In Milan, the Ftse/Mib index fell by 3,3%, less than in Madrid -3,9%. The drop in the Eurostoxx 50, the blue chip index, was also heavy, down by 2,7%. The euro drops to 1,2881. Crude oil also fell sharply: the wti lost 2,25% settling at 89,31 dollars a barrel.
The dark clouds hanging over sovereign debt weigh even more heavily: the Spanish Bonos are back at 6%, something that hasn't happened for months. The yield on the 10-year BTP jumped to 5,18% from 5,07% the previous day. The spread shot up to 381.
In the morning, the auction with which the Treasury placed 9 billion euro of six-month maturity bonds at a yield of 1,503%, the lowest since March, concluded successfully. But the slight drop from 1,585% at the end-August auction was less than expected.
Thus the fear is growing that the medicine of the central banks has already exhausted its effects. Especially in Europe, plagued by the usual governance problems. The triggering cause of the sales, in fact, lies in the joint statement of the triple A finance ministers (Germany, Holland and Finland) who have ruled out that the new state-saving fund can lend money directly to banks (at least not before the supervisory reform) or pay off past debts. The money should be requested directly from the Spanish government, with heavy effects on public finances. Thus the decision taken unanimously a few months ago is contradicted.
The central bank effect also dominated the session in Asia and the US. In Shanghai +0,3% and in Hong Kong +0,5%, however, the stock markets are recovering. This is thanks to the sharp decline in Chinese quarterly data which, according to operators, will force Prime Minister Wen Jiabao to intervene with massive stimuli, postponed so far for fear of the effect on inflation.
On Wall Street, on the other hand, the session was dominated not only by the news on Spain and Greece (today a clash in Parliament over the package of cuts proposed by Prime Minister Antoni Samaras) by the echo of the statements by the president of the Philadelphia Fed Charles Plosser, non-voting member of the Fed Monetary Committee (FOMC). According to the banker, QE3 will not boost the economy and employment, while it will increase the risks of inflation and loss of credibility of the US central bank.
Furthermore, the US real estate market has not given the turning signal that the American authorities had hoped for: in August, sales of new homes did not exceed 373 units, practically unchanged from the previous month (372), while economists had an increase to 380 thousand is expected.
This also contributed to the decline on Wall Street: the Dow Jones fell by 0,33%, S&P500 -0,57%, Nasdaq -0.77%. John Chambers, CEO of Cisco, announced his forthcoming resignation yesterday. Thus one of the legendary characters of the first wave of the new economy leaves the scene. In Europe, sales mainly hit banks (Stoxx in the sector -4%), the auto industry (-3,2%) and tech stocks (-2,8%).
In Milan Unicredit has slid down 5%, Banco Popolare lost 6,1%, Ubi -5,7% Understanding -4,6% Montepaschi -4,1%. Banca Popolare di Milano -5,7%. Heavy losses even for Generali -3,8% and Mediolanum -5,2%. in the European landscape Deutsche Bank closed down 6,2%, Bnp Baribas -4,7% ubs -4,2%. Sensitive to the price of oil, Eni fell by 2,6%, accompanied by Saipem -2,1% and Tenaris -2%. Among the industrialists, Fiat lost 3,8%, Pirelli -2,9% Finmeccanica -2,3% Prysmian -2,7%. Bigger discount for StM which lost 4,2% following the profit warning of Infineon of yesterday. Enel closed down 3,9%, Telecom Italy -3,2%.
