Moody's has cut Italy's sovereign debt rating to A2 from AA2, maintaining the negative outlook, but Piazza Affari doesn't seem to notice it. Indeed, in openings the Ftse Mib index marks a decisive and unexpected rise, settling in positive territory of 1,7%. However, volatility remains very high, so much so that in a few minutes the earnings are halved: at 9am Milan already marks +30%.
The three notch rating cut, which concludes the downgrade analysis, which began on 17 June last, is based on three main factors: – the increase in long-term financing risks for a country like Italy with a high debt level in the context of the crisis of confidence and the sovereign debt crisis that is characterizing the euro area; – the increased risks of lower growth due to Italy's macroeconomic structural weakness and the worsening global outlook; – the risks of application and the time necessary to achieve the targets of the corrective maneuver in order to reverse the negative trend of public debt due to economic and political uncertainties.
Moody's in the note released yesterday evening explains that these growing risks justify the downgrade despite some positive elements, starting from the absence of significant imbalances in the Italian economy. Moody's decision to cut the sovereign rating of the Italian Republic by three notches was expected. This is Prime Minister Silvio Berlusconi's first comment on the rating agency's announcement in a brief note. The Council Presidency document adds that the Italian government is working with the utmost commitment to achieve the objectives set by the economic manoeuvre, approved and appreciated by the European Commission.
Giulio Tremonti, however, gives a personal interpretation of the "maximum commitment": answering a question on the spread between the yield of Spanish government bonds and the German Bund, which is lower than the Italian one, the Economy Minister said that there are several variants to be taken into consideration and "in the case of Spain it could depend on the announcement of elections and the prospect of a new government". Tremonti immediately ruled out a connection with the Italian situation. “I said so to speak,” he specified amid general skepticism.
Roller coaster ride on Wall Street. But, this time, with a happy ending. At the end of the day, the Standard & Poor's 500 index closed up 2.25%, after a largely negative day. Not indifferent detail, because during the session the index fell several times below 20 percent compared to the maximum. In other words, it has entered a recession, also on a technical level. Then, almost suddenly, the Bull entered the arena: in just 50 minutes the S&P' 500 achieved a rise of 4,1% also dragging the Dow Jones Industrials +1,44% and the Nasdaq composite +2.95 %.
What is responsible for this sudden trend reversal? The revenge started after the Financial Times website reported a statement by EU Commissioner Ollie Rehn: "The conviction is gaining ground that a common strategy is needed to stop the landslide of sovereign debt". At first glance it doesn't seem like an epochal affirmation, but the mere idea that Europe emerges from the suicidal stagnation of these days was enough to give new life to the market. The violence of the recovery of the shares of the financial giants is enough to confirm the situation of unnatural market volatility: Morgan Stanley recorded a leap of 17 percent, Bank of America of 10%. Here are Ollie Rehn's phrases that gave Wall Street new life once they appeared on the FT website at 22:14 Italian time. “There is a growing consensus that we need a concerted and coordinated approach in Europe, although many interventions are the responsibility of individual states: ministers share the urgency and we need to act”. In summary: “The capital of European banks must be strengthened as soon as possible to increase safety margins and reduce uncertainty. This action must be considered an integral part of the European Union's strategy to overcome the crisis”.
Faced with the collapse of Dexia (which has 3,5 billion Greek bonds on hand but also 15 billion in Italian BTPs) and the difficulties of Deutsche Bank, Europe seems ready to react. Wolfgang Schaueble himself, the German finance minister who opposed the more decisive expansion of the state bailout fund, declared that "we all know that the most serious risk of the current crisis is that it will result in a collapse of the banks" . It is not clear how any capital injection will take place. The quickest way passes through the national authorities with the support of the ECB institutions. “The recovery has been much less strong than we had hoped”. And again: “Monetary policy can play a very important role, but it is not the panacea for the ills of the American economy. The task of restarting growth and employment affects politicians even more”. Thus Ben Bernanke before the US Congress. The chairman of the Federal Reserve repeated already familiar arguments: the economy remains weak also due to two external factors, the repercussions of the Japanese earthquake and the European sovereign debt crisis. The Fed has not run out of cartridges at its disposal and will play them, if necessary, when the time comes. But the most important thing is that Congress and the White House move on the front of debt, taxation and a strategy for employment and development.
For the first time in 2011 Brent fell below $100. It is another sign of a recession that has also infected Goldman Sachs, traditionally the leader of bullish traders on crude oil: the investment bank has reduced its forecast for 130 from 120 to 2012 dollars a barrel.
New session of sharp declines for the European stock exchanges, which in any case managed to close above the lows thanks to the statements of the president of the Fed, Ben Bernanke, who said he was prepared for other initiatives to support the economic recovery. In Milan, the FtseMib index closed down by 2,7%, London lost 2,5%, Paris -2,6%, Frankfurt -2,9%. Bank stocks were very bad (European Stoxx -4%), weighed down by fears that a possible Greek default would trigger a banking crisis, with the Franco-Belgian institution Dexia losing more than 20% on the Stock Exchange. The climate was also made worse by the profit warning from Deutsche Bank which deems the gross profit of 10 billion in 2011 no longer achievable for core business activities. Shares of the German bank fell 4,3%. In Milan, Unicredit -4,5% and Intesa -6,2% fell. Banco Popolare -2,7%, Mps -5,22%, Ubi -2,86%. The race for Bpm stops: -5,57% on the day of yet another decisive board of directors (or almost). Last night Investindustrial said it has 2,6% of the capital. Less aggressive sales on insurance companies: Generali -0,7%, the upward push on Fondiaria Sai -1,2% ended. Heavy declines for Fiat -7,47% and Fiat Industrial -8,46%, in line with the retreat of Buzzi - 7,28% and Italcementi -5,7%. Eni holds -0,2%. Other oil stocks fell, especially Saipem -4,4% and Tenaris -3,6%
Solution for the yellow Impregilo (+4,7% yesterday on the Stock Exchange). The "culprit" of the purchases was precisely Salini constructions. The company announced the purchase of 8,13% of Impregilo: between 21 September and 3 October the package of 5,01% was accumulated by Equita Sim, to which was added yesterday the purchase of a further 12.560.061 shares, bringing the total percentage of capital with voting rights held to 8,13% with a total outlay of 65 million. “The management of Salini Costruttori – reads a note – considers the investment thus made strategic and aimed at creating the foundations for a constructive and functional dialogue to establish an industrial collaboration as well as facilitating a hypothesis of dimensional growth of the company aimed at being able to better compete in international markets”. But the entry was not agreed with the shareholders of Igli (Benetton, Gavio, Fondiaria) which holds the majority.
Pop Milano's board of directors resolved to make an offer of 100 million euros for the 6,49% stake held by CIC, of the Credit Mutuel group, in Banca di Legnano with the aim of reaching full ownership of the subsidiary. This was stated in a note from the institute which, in addition, denies the recent rumors about an inspection underway by Bank of Italy on the bank or on the companies of the group. Furthermore, with regard to the question relating to the promotions of the bank's personnel and in particular the 2010 document which appeared in the press in which the rules were established for creating a preferential lane for the Amici della Bpm associates "the Board of Directors and the General Management of the bank firmly reiterate that we were never aware of the existence of such a document”. “The General Management of Banca Popolare di Milano has informed the BoD that it has launched an internal verification procedure relating to internal career advancements over the last five years; the results of this verification must be received before the Extraordinary Shareholders' Meeting scheduled for October 22, 2011” the note reads.
Although negotiations have resumed, on the road to the March agreement (Edipower stew and EdF control Edison), there are still some non-secondary issues to be resolved, first of all that of fixing the value of the put option (right to sell) to be grant to Italian shareholders. To this was added another variable, the Government's willingness to create an Italian pole of renewables. We expect more clarity on the situation after the meeting between Minister Paolo Romani and Henri Proglio set for the weekend. With regard to the put, Il Messaggero reports that A2A would like to offer Edf a three-year option at a value of 1,5 euros per share, a price that we believe is high given the evolution of Edison's expected margins.
