Consider Saudi Arabia's diplomatic crisis, which creates problems for US oil strategies. Add the delicate situation of the European Union, grappling with the refusal of the Italian government to revise the budget law. And mix it all up in light of the shaky position of Teresa May, who can't get a Brexit deal off the ground (this morning the pound trades at 1,1296 against the dollar).
The result is an indigestible cocktail for global finance, already grappling with the war on tariffs and the risk of a return to the Cold War after Donald Trump's latest moves on nuclear non-proliferation treaties.
The Asian price lists recorded the wave of general uncertainty this morning.
Asian stock markets are all down. Tokyo loses 2,3%, Seoul 2,5%.
Chinese stock markets also fell in the aftermath of the best session in the last three years. Shanghai and Shenzhen CSI 300 index -1,7%, Hong Kong Hang Seng index -2,3%.
The dollar-Chinese yuan cross is near its highs from the end of 2016 at 6,94. Tensions remain high between the United States and China, in view of the meeting between Donald Trump and Xi Jinping, scheduled for the end of the month in Buenos Aires, where the G20 will take place. The White House economic adviser, Larry Kudlow, complained in an interview with the Financial Times of China's uncooperative attitude.
Both the Dow Jones (-0,5%) and the S&P 500 index (-0,43%) were weak on Wall Street yesterday. The Nasdaq rises (+0,26%) thanks to the push of Intel and Amazon, which will reveal the quarterly accounts this week, together with Alphabet and other companies in the tech sector.
The yield on bonds falls: the 3,17-year Treasury trades at 2,3%. Bank stocks were affected: Goldman Sachs -XNUMX% .
Oil continues to float around 80 dollars (79,7 dollars the Brent price this morning). In view of the embargo on Iran and under international pressure for the assassination of journalist Jamal Khashoggi, Riyad is showing itself to be very cooperative: the Saudi oil minister, Khalid al Falih has said that, if necessary, the production of his country can be increased up to 11 million barrels per day.
This morning, both futures on Wall Street and on European stocks recorded a drop of 0,4%. It is above all Italy that conditions moods. In a note from Goldman Sachs edited by strategist Silvia Ardagna, it is noted that Moody's limited itself to launching an initial warning. It would be wise if, before the verdict of the other agencies, the maneuver were corrected above all for the part concerning the pension reform.
THE REJECTION OF THE ITALIAN MANEUVER IS COMING
Today the situation threatens to worsen: the college of EU Commissioners meeting in Strasbourg on the sidelines of the Eurogroup plenary could proceed with the rejection of the draft of the Italian budget law. Sebastian Kurz, the Austrian premier and current EU president, has already expressed himself in this direction. Thus, for the first time, the possibility arises that a budget law will be rejected. In this case, Italy will have three weeks to draw up a new text that takes into account the findings of the Community partners. Then the procedure for excessive deficit could open.
MILAN BELOW 19, AT THE LOWEST SINCE MARCH 2017
Piazza Affari started the week in swings. The initial rebound, largely due to relief because Moody's, despite the cut of the rating to Baa3, kept the Italian outlook stable, faded away after the publication of the letter from Minister Giovanni Tria to Brussels which reiterates that the Government says it is "confident that the budget maneuver will not expose the financial stability of Italy, nor of the other member countries of the European Union, to risks".
Since then, the stock exchange has changed course: the Ftse Mib index, after having reached a maximum of 19.467 (+2%) began its descent, closing with a drop of 0,60% at 18.966, the lowest since March 2017.
The rest of Europe also weakened during the day, albeit with less pronounced declines: Frankfurt Dax -0,26%, Paris -0,62%. Madrid does worse (-0,98%).
London loses only 0,1%. But concern over Brexit weighed on the pound, which dropped below 1,30 against the dollar.
THE SPREAD RISES ABOVE 300
Even the BTPs lost part of the progress recorded in the morning in the wake of the downgrade by Moody's during the session.
The Btp/Bund spread closed the day at 302,50 after falling to a low of 280. The 3,30-year yield dropped to 3,45%, before recovering roughly to last Friday's levels, around XNUMX .XNUMX%.
CREDIT SUISSE CUTS BANKS' RATINGS
The turnaround of the markets hit the banking sector in particular: after a brilliant start, the sector was hit by a shower of sales after the publication of a Credit Suisse report which cut the target prices of the securities up to 33 %, anticipating the negative opinion of the rating agencies that will pronounce after Moody's. However, the report also takes into account the draft balance sheet presented last week with the "tax on banks" (an aggregate taxable amount of around 9 billion more according to the calculations of analysts). The big names were negative: Intesa Sanpaolo -0,9% (the institute decided to proceed with the merger by incorporation of Cassa di Risparmio di Forlì e della Romagna) and Unicredit -1,9%.
DISCOVERERS LIKE BANCA BPM
Analysts from the Swiss institute also found that the sector has attracted short sellers on a global scale. Medium-sized Italian banks, thanks to their high free float, are the target of speculation: the most short-selling bank in Europe is Banco Bpm, closing yesterday -3,12% (relegated underperform) followed by Bper (-3,65 .2,18%) and Ubi (-XNUMX%).
MPS HUNTING FOR FUNDS AT THE HEDGES
Speaking of speculation, according to the Financial Times, representatives of Monte dei Paschi (-5,31%) participated at the beginning of the month in a meeting organized in London by JP Morgan with some investors specialized in high-risk operations to ensure fresh assets (200 million) should the situation make it necessary. The deputy prime minister said yesterday that “for now we keep the credit institutions under control. We are monitoring the situation." According to Credit Suisse analysts, a widening of the spread of 100 basis points reduces the tangible equity of MPS by 4,2%, the highest reactivity among the major Italian banks.
Managed savings are also under fire. For the fifth month in a row, redemptions have exceeded subscriptions in Europe. Meanwhile, a Consob investigation certifies that Italians, already first in the Old Continent for the creation of new savings, are now bringing up the rear.
Azimut drops 2%. Banca Generali -2,5% after announcing the purchase of 100% of Nextam Partners, which holds around five billion euros in assets.
AFTER MARELLI: THE CASE OF FCA HAS NEVER BEEN SO RICH
Fiat Chrysler (+2,98%) took care of giving Piazza Affari a polish, which concluded the sale of Magneti Marelli for 6,2 billion euros, (above the estimates circulated on the market) to the Japanese CK Holding, of Calsonic Kansei Corp. (KKR Group). The deal is expected to close within the first half of 2019. Fiat Chrysler has also signed a multi-year supply contract with Magneti Marelli CK Holdings. Magneti Marelli Holdings will have a total turnover of 15,2 billion euros, in seventh place in the world ranking of automotive components.
At the end of the year FCA will have 9 billion of net industrial liquidity, the highest value in its history. Jefferies hypothesizes an extraordinary coupon of 2 billion euros.
FERRAGAMO FEVER EXPLODES
Another hot topic, the fate of Salvatore Ferragamo (+7%). What ignited the market's attention was the disappearance Wanda Ferragamo, widow of the founder and honorary president of the family company. The farewell of one of the historical figures of the group could rekindle the hypotheses of a sale of the brand.
A LAST GOODBYE TO GILBERTO BENETTON, THE MIND OF THE GROUP
Eyes on Atlantia and Autogrill at the opening today. Italian capitalism had to register another loss yesterday: Gilberto Benetton has passed away, 77 years old, the financial mind of the Ponzano Veneto group, former vice president of Edizione, the group holding company, of Autogrill and director of Atlantia, Mediobanca, Pirelli and Allianz.
