Economic activities in Europe and the USA remain buoyant, in the light of the PMI data for the month of April, but the tightening of the central banks (Fed, ECB and BoE) is approaching and seems faster than expected, while the war in Ukraine and the “zero Covid” policy in China are fueling global uncertainty. Thus the markets are confirmed as volatile and today they close in clear decline in Europe, with one eye on the quarterly results and the other on the run-off in France. The start is also out of tune on Wall Street, after yesterday's losses, and on the US government bond market, the 5-year bond yield exceeds 3%, triggering an inversion of the curve that raises fears of a forthcoming recession.
Thump from Frankfurt fearing the Russian gas embargo
The European price lists close a session in deep red. Business Square it retreats by 2,12% to 24.279 basis points, weighed down by energy, industry and luxury, in a similar way to the rest of the continent where Frankfurt is in the dark with a drop of 2,49%. Perhaps the Bundesbank's estimates according to which an immediate EU ban on gas imports from Russia would cost Germany 180 billion euros in 2022 in loss of production weigh heavily. “In the most severe crisis scenario, real GDP in the current year would fall by almost 2% compared to 2021 – argues the Bundesbank – moreover, the inflation rate would be significantly higher for a longer period of time”. Among German stocks that presented a quarterly report, Sap dropped by 1,15% after showing declining quarterly earnings and warning that exiting the Russian market will inevitably come at a cost.
Paris marks a decline of 1,99%. Kering's slip is felt, -4,32%. The luxury giant pays tribute to Gucci's sales decline in the first quarter, due to a slowdown in the Chinese market. They are negative Amsterdam -1,62% and Madrid -1,8%. He's not doing well either London, -1,39%.
Business is booming in the Eurozone
The weather was cloudy right from the start, following the words of Jerome Powell yesterday, despite the euro zone business unexpectedly rising in April, thanks to the services sector. But slow it down manufacturing. Translated into numbers: the composite index in April reached 55,8 points, the highest for seven months. The services index hits 57,7 from 55,6 points in March, the highest in 8 months; the manufacturing one drops to 55,3 from 56,5 in the previous month, the lowest for 15 months. Remember that beyond 50 points you are in any case expanding.
In the US the situation is reversed: the manufacturing PMI rose to 59,7 in April (58,8 in March), above estimates, thanks to a sharp acceleration in demand. The tertiary sector disappoints: 54,7 points (from 58) and against a consensus that saw the March figure confirm. The composite stands at 55,1 points from 57,7 previously.
Only Hera is saved in Piazza Affari
In Milan you save yourself only Ivy, +0,47%, in a sector, that of utilities, which has tried to resist the general flight until the end.
The rest of the price list is in red starting from Saipem, -7,54% on which many investors cashed in after yesterday's leap following better-than-expected accounts. According to Bestinver, the reaction on the eve was "excessive" since the broker does not expect "any significant recovery of the share price until the two billion euro capital increase is executed in the second half of the year".
Heavy among oil stocks too Eni, -3%.
Rain sales on Telecom, -4,36%.
The shares of the Agnelli galaxy lose share as Cnh, -4,35%; Iveco -3,82%; stellantis -3,23%; Ferrari -3,5%. The Maranello house has announced that it will call 2.222 cars in China due to a potential defect in the braking systems. He suffers Exor, -3,02%. In luxury Moncler it dropped 2,23%.
Central banks on the attack against inflation
Rates thus rise in Europe and in Italy pending the verdict of Standard & Poor's on Italian sovereign debt, in a context in which the conflict puts the country's growth at risk. The International Monetary Fund forecasts “very weak or negative quarterly growth in mid-2022 for some of Europe's largest economies such as France, Germany, the United Kingdom and Italy”.
Lo spread between 165-year BTPs and Bunds with the same duration, it is confirmed at 0,11 points (-2,61%), but yields soar: +0,96% for the BTP; +XNUMX% for the Bund.
The era of easy money seems to be over. Central banks are playing the charge against inflation starting with the Fed and investors gear up. Yesterday Jerome Powell said a 50 basis point hike would be on the table at the May 3-4 meeting and moving a little faster would also be appropriate. Morale is already betting on three consecutive increases of 50 basis points, which would be the fastest intervention since 1982. A historic step.
However, yesterday "hawkish" comments also arrived from Europe, in particular from the number two of the ECB Luis de Guindos, according to which Eurotower should end its bond purchases in July and open the doors to a possible first rate hike in the same month . "Eurozone money markets are now fully pricing in a 25 basis point rate hike by July," writes Reuters.
Euro and oil down
The euro withdraws, falling below 1,18 against the dollar. The yuan hit a nine-month low as lockdowns in Shanghai hit China's growth prospects.
Oil is retreating, which looks at the increase in interest rates and the lockdowns of the celestial empire with some apprehension. Brent loses 1,63% and trades around 106,50 dollars a barrel; the WTI drops by 1,27% to 102,47 dollars. Gas in Amsterdam was negative at 95,5 euros per megawatt hour in the morning.
