Another historic barrier for Chinese finance has fallen: starting next year, category A shares traded in Shanghai and Shenzhen will join (after three refusals in the past) Morgan Stanley's MSCI Emerging Market indices. In this way, the funds (with total assets of 1.600 billion) that have the indices as a reference will have to make large purchases in the coming months both on the Chinese Stock Exchanges (in second place in the world by size, for a value of 7,500 billion dollars) and on the bond market (third place). According to Reuters, the capital flow will be around 17-18 billion dollars.
MSCI NO TO ARGENTINA, YES TO SAUDI ARABIA
Things didn't go so well for Argentina: MSCI has denied emerging market status to Buenos Aires, which in any case consoles itself with the placement of the 100-year issue in dollars. Among the oil powers promoted Saudi Arabia, but not Nigeria. The lower perception of risk is confirmed by the success of the bonds (3 billion dollars) at the lowest interest rates ever (5,25% the thirty-year rate in euros) issued by Russia to compensate for the drop in Moscow's oil revenues, caused by the oil brake.
EQUITA: THE PIR EFFECT IS ABOUT TO SLOW DOWN
In short, the markets, for now, do not price in the upward trend in US rates, even if confirmed by the words of the Fed governors in recent days. But a call for prudence arrived yesterday, regarding the Italian market, from Equita. The broker has reduced the weight of shares in its mid-small portfolio by 10%, while simultaneously increasing liquidity: according to the broker, the collection of individual savings plans (PIR) is in fact physiologically destined to slow down in the summer months and the multiples of small and midsize companies on average achieved an 8% premium over their competitors.
"Our fear - we read - is that in the absence of the acquisitions fueled by the collection of PIRs, profit-taking linked to valuations on historically high levels and the approaching political elections in Italy (March-April 2018)" , explains the broker in today's daily. Equita's caution is not limited to SMEs, but affects the market as a whole: "The thesis of those who foresee a strengthening of global growth in the coming quarters is in our opinion contradicted by the flattening of the interest rate curve and the drop in oil prices ”, continues Equita, linking the slowdown in crude oil to a demand problem. An invitation to caution.
OIL SAYS A BUT TO THE BULL IN ASIA AND WALL STREET
Chinese price lists were positive but not too much after the green light from MSCI: Shanghai +0,1%. The decline in energy stocks is at the root of the weakness in Tokyo (-0,2%) and in the markets of the Asia-Pacific area. The worst place is Sydney (-1,1%). Hong Kong loses 0,5%, Taiwan +0,4%. Seoul loses 0,5%, Mumbai -0,2%.
Oil also held back Wall Street: the Dow Jones index fell by 0,29%, S&P 500 -0,67%. Worse was the Nasdaq (-0,82%).
Prices on the bond market rise: the 2,16-year Treasury is trading at a yield of 2,19% (yesterday XNUMX%).
Good news for Donald Trump: Republican Karen Handel won the by-election in Georgia, the first electoral test of the year.
However, the signals sent by the Fed are conditioning the market: yesterday Eric Rosngren of the Boston Fed said that low rates represent a risk to financial stability. Robert Kaplan of the Dallas Fed has downplayed the risks of low inflation: the phenomenon, he said, is explained by technology.
The tech sector closed in the red (-0,8%), pushed downwards by Apple and Microsoft. After surpassing $1.000, Amazon closed down -0,26%, at $992,56. Worth noting is the leap of Tesla (+2,44%, to 372,24 dollars). The high-end electric car company is close to an agreement to build its first plant in China.
LIBYA, SHALE OIL AND STOCKS: OIL AT THE LOWEST SINCE NOVEMBER
Even gurus make mistakes. And they pay. The fund owned by Pierre Andurand, the legendary hedge manager who manages the oil investments of the large Gulf families from London, has suffered a 17% loss since the beginning of April. The financier, in view of the renewal of the agreement on the extraction ceiling of the large producers, had bet on the rise in crude oil. Conversely, black gold is in free fall: -2,37% yesterday Brent at 45,81 dollars, Wti at 43,23 (-2,69%), the lowest since the beginning of November. There are several causes of the fall:
1) Production in Libya, which is exempt from compliance with OPEC quotas, is at its highest level in four years after successfully resolving the dispute with the German Wintershall, which made it possible to restart the production of two fields already seized : Now production can go back to 900.000 barrels per day.
2) US inventories continue to grow despite the increase in summer consumption. The same trend for crude oil stowed on ships: according to Kepler, there are 111,9 million barrels on tankers, the maximum in 2017.
3) Finally, the production of US shale oil: 893 wells are in operation, the highest level since May 2015, from which 9,33 million barrels per day are extracted.
During the night came the news of a change at the top of Saudi Arabia's power structure. King Salman has named his son Mohammed bin Salman, 31, who already has the powers over oil and foreign policy, as his heir.
Weak oil companies and companies related to the sector. On Wall Street, Exxon fell by 0,4%, Chevron -0,91%. General Electric -2,33%, Halliburton -1,3%, Schlumberger -1,98%.
The European Stoxx index of the Oil sector closed down by 2,1%. Heavy day for oil stocks also in Piazza Affari: Eni -2%, Saipem -1,9%, Tenaris -3,2%.
BAGS DOWN IN EUROPE TOO. THE SPREAD GOES DOWN
The drop in crude oil also weighed on the price lists in Europe. The worst stock exchange was Piazza Affari: the Ftse Mib index closed at -0,97%. Madrid -0,84%, Paris limited losses to -0,32% and Frankfurt lost 0,58%. London falls by 0,68%, with the banking giant Barclays (-1,91%) and four of its former executives indicted for aiding and abetting fraud and illegal financial assistance for the funds received from Qatar Holding which in 2008 allowed the bank to exceed the financial crisis without asking for public bailout. The pound weakens against the main currencies.
The Italian secondary market was in positive territory, together with the rest of the European peripherals, in a session dominated by the scarcity of volumes. Both the 1,915-year yield at 165,3% and the premium between the Italian and German rates at 1,915 basis points and 17% are updated to their lows since mid-January, the lows since XNUMX January.
CANNITA: FOREIGNERS RETURN TO BTPs
The Italian Ministry of the Economy sees a return of interest in Italian government bonds by retail investors, as the rate normalization process continues. This was stated by Maria Cannata, head of public debt management, who spoke yesterday at a London conference. The Treasury's strategy, you explained, envisages studying potential opportunities on the market for sustainable bond issues - the so-called green bonds - even if it does not yet have precise plans. The climate of political uncertainty, concluded Cannata, had no negative repercussions on the Italian market.
JP Morgan AM, which currently has a neutral exposure to Italian debt, is ready to increase the weighting of BTPs if yield differentials widen. Nick Gartside, international chief investment officer for fixed income at JP Morgan AM, told Reuters. "From an economic point of view - he said - Italy appears in good shape: a modest budget deficit, current account surplus and growth picking up".
VENETIAN BANKS, OFFERS TO ROTHSCHILD TODAY
In Milan, the banking sector weighs in, worsening compared to the middle of the session with the sector basket closing down by 0,8%. The deadline for presenting offers to the Rothschild advisor for the Veneto banks expires today. We are moving towards the sale of the two institutions with orderly liquidation and spin-off of non-performing loans for 10 billion. The 5 billion already earmarked for the precautionary recapitalization will be allocated to the operation. In pole position for the purchase of Popolare Vicenza and Veneto Banca is Intesa San Paolo (-0,39%).
The solution of orderly liquidation is covered by Article 46 of the BRRD. European antitrust commissioner Margrethe Vestager confirmed yesterday that "there is a certain flexibility in the rules". Unicredit (-0,8%) said it was only available to participate in a system solution for the bailout. Among other stocks, Ubi -0,5%, Banco Bpm -0,5%, Mediobanca -1,9%. Banca Carige suffers (-3,52%) on the eve of the board meeting on governance and capital. The hypothesis of a request for an extension to the ECB to present the bank's relaunch plan (on governance, recapitalization and non-performing loans) is making headway, even if it now seems inevitable that the financial package will rise to at least 600 million. The Board today will co-opt Paolo Fiorentino.
Insurance companies were also negative: Unipol -0,5%, Cattolica -2,3%. In the face of the recent provisions of the Venice judiciary, the precautionary suspension of Giuseppe Milone with immediate effect. Generali -1,1%: Francesco Gaetano Caltagirone sold 1,5 million shares (about 1% of the share capital) following the exercise of call option rights at maturity.
LUXURY IN BREATH IN THE WAKE OF KERING
Great animation around the luxury sector. Ferragamo is up 1,7%, Moncler +2%, Yoox +1,4%. Attention to the sector is catalysed by both a UBS report, which underlines that the Global Blue data show a +17% increase in tourists' spending on luxury goods for the month of May, with Europe better than Asia, and one by Berenberg in which analysts say they are more confident after a recent trip to China. But the most positive indications came from the investor day of Kering+2%, one of the giants of French luxury (Gucci and Bottega Veneta among the subsidiaries). The leading company in the luxury segment expects a growing market with ample opportunity to increase the number of stores and margins.
TAMAGNINI IN STM, THE SUN SELLS TRAINING
Falls back compared to the day before Stm (-2,58%) on the day of the appointment of Nicolas Dufourcq as president and Maurizio Tamagnini as vice president of the supervisory board. Leonardo (-3,3%), Brembo (-1,7%) and Buzzi (-1,6%) fell. Fiat-Chrysler +0,5%.
Negative closure for Enel (-0,8%). According to Merger Market, the Spanish company Renovalia has received the first round of offers from Endesa, controlled by the Italian group. Terna -0,4%, Snam -1,2%.
Telecom Italia closes down by 0,7%: Banca Imi confirmed its positive view (buy, Target price 1,08 euro).
Il Sole 24 Ore remains strong (+6,47%) after the binding offer of the Palamon Capital Partners fund was accepted for a share of the Training and Events area valued as a whole at 80 million (enterprise value).
