To remedy the negative legacy of the Great Recession, the economic system must be put "under high pressure," said Janet Yellen last Friday in Boston. The US locomotive, you added, is still traveling at a rate of 7%, under capacity due to the crisis. That is, it is the message of the Fed president, the next modest increase in US rates does not indicate a change in monetary policy. Indeed, the Fed is ready to support growth even when inflation reaches 2% and above. The goal, Fed Chairman Eric Rosengren said, will be reached and surpassed by mid-2017.
No direct mention has been made on the subject of rate hikes, but the market has deemed that these new growth management concepts are consistent with a monetary policy that envisages a higher cost of money. These statements this morning support the purchases of long-term US bonds, starting from thirty years. The T bond 10 rose 1,78% to a 4-month high. The trend in turn favors the rebound of the dollar well bought by the managers: the US currency is at a seven-month high (1,09 against the euro).
The signals arriving from overseas can lend a hand to Mario Draghi, who is engaged in his battle to bring growth and inflation back up. The decision on whether or not to extend QE beyond the March deadline will be examined by the ECB directorate next Thursday. It is probable that the choice will not arrive before the December meeting, but the meeting should in any case adopt very significant changes on the mechanisms of purchases by the central banks of the Eurozone. And behind the scenes a bitter battle is announced between the doves (see the chief economist Peter Praet, very close to Draghi, who also proposes purchases of ETFs) and the hawks, who do not intend to settle for tapering (the reduction of purchases).
"STABLE" ASIA BETWEEN VOLCANO ERUPTIONS AND CASINO HANDCUFFS
Against this backdrop, the week opens under the banner of caution. Stop Tokyo (+0,1%), after a promising start. The other Asian lists were weak, Asia Pacific index -0,7%. Hong Kong (-0,5%) is at its lowest level for two and a half months. All the companies that manage gaming halls are in the fall: China has arrested the top management of Crown Resorts, an Australian casino operator. The Sydney Stock Exchange loses 0,7% and Crown Resorts shares collapse (-13%). The Chinese stock exchanges moved little. Markets' attention is on the third quarter GDP data, due out on Wednesday. Growth of 6,7% is expected.
The recent eruption of Mount Aso in the Kyushu islands jeopardized the most important Japanese IPO of 2016: the placement of the shares of Kyushu Railroad, the railway company of the islands, valued at 4 billion. Complicating the process towards listing (stocks on offer from today, debut on the Stock Exchange on the 25th) was the reawakening of the activity of the volcano, linked to two strong earthquakes accompanied by intense seismic swarms which complicated tourist projects already planned for the islands.
Futures on US stock exchanges also mark time (this morning -0,3%) after a week of declines: Dow Jones -0,6%, S&P 500 -1%, Nasdaq -1,5%. Oil prices are under pressure: Brent at 51,84 dollars a barrel, Wti at 50,13. The recent price increase has prompted many US producers to restart their shale oil wells.
WALL STREET, 80 QUARTERLY. AND TV'S BIG MATCH CLINTON-TRUMP
Wall Street's attention is focused on two issues. First of all in the ring of Las Vegas, at the headquarters of the University of Nevada, where the last and perhaps decisive match between Donald Trump and Hillary Clinton will be broadcast, leading the polls a few days after the vote for the White House (November 8 ). Wall Street now openly sides with the democratic candidate, undermined by the torpedoes of Wikileaks armed by Russia.
The season of reckoning is in full swing. The results of more than 80 companies listed in the S&P 500 are expected this week. Among these, the financial ones Bank of America and Goldman Sachs stand out, but also some hi-tech giants: Ibm, Netflix, Yahoo, Intel and Microsoft.
Today's most important macro data for the Eurozone concerns the trend of inflation.
BTP ITALIA, MINIMUM COUPON AT 35%
In Italy, the launch of the Btp Italia offer, the second of the year, the tenth overall, will take center stage. The bond, linked to inflation, will usually have an 8-year maturity and a minimum coupon of 0,35%, down from the 0,40% of last April's issue. Once again, the investor who holds the bonds from their issue until maturity receives a loyalty bonus equivalent to 4 per thousand calculated on the value of the investment. The security, commented the head of public debt Maria Cannata, has "a visible return", its quotations remain "always close to par while the risk with a nominal security is to suffer losses".
Maria Cannata also announced that the Treasury is reaching its objective of lengthening the average life of the debt, the stock of which has a cost of just over 3%. said. At the end of September the average life of the debt rose to 6 years and 8 months. “The goal is to reach 7 years”.
Friday could be an important day for the Italy rating. Fitch's rating is scheduled to be updated (equal to BBB+) which, at the beginning of October, cut its 2017 growth estimates for our country from +1% to +0,9%. But the agency's decision is likely to be postponed pending the outcome of the referendum. At the end of October, contracts on stock and index options expire on Friday in Piazza Affari. On the same day, Eurostat will publish data on government deficits and debt.
POPOLARE-BPM: THE THIRD POLO IS WAITING FOR THE GIFTS FROM PIAZZA AFFARI
At the center of attention today in Piazza Affari was the reaction of the markets to Saturday's historic vote with which the shareholders of Banco Popolare and Banca Popolare di Milano gave the green light to the first banking merger in Europe after the launch of the ECB's Single Supervision and to the first effect of the popular reform. With the merger between the two institutes, the third banking group in Italy is born with total assets of over 170 billion and a market capitalization of around 4 billion, a market share at national level of 8,2%, first in Lombardy with over 15%.
Technically the merger (approved by Bpm with 7.314 votes, equal to approximately 71,8% of the 10.198 shareholders admitted to vote) provides for the establishment of a new joint-stock company with the role of parent company called Banco-Bpm which will be headed by Bpm Spa , a network bank with over 600 branches in the former popular Milan area, spun off for a maximum of three years. “Certainly in the future, I think quite distant – said Giuseppe Castagna – we could be an unifying pole”. The plan drawn up last May envisages a net profit of 2019 billion in 1,1, with a fully phased CET1 of 12,9%. Fully operational synergies are estimated at 460 million, of which 320 million in cost savings. Approximately 1.800 redundancies are expected (out of approximately 25.000 total employees) and will be managed on a voluntary basis. Particular attention will be paid to the Npl issue with a plan to reduce non-performing loans for at least 8 billion and with possible further transfers for 2 billion. The goal is to reduce the incidence of gross non-performing loans to 17,9% from 24,8% at the end of last year with a coverage of only non-performing loans of 59% from 57%.
Poste Italiane has communicated to Pop Milano that it does not want to renew the shareholders' agreement on the shares of Anima Holding which expires on 16 April.
MPS, THE PASSERA PLAN IS REVIEWED. UNICREDIT TREATS PEKAO
Monte Paschi is also in the spotlight. Surprisingly, the plan drawn up by former minister Corrado Passera, set aside by Fabrizio Viola at the time, is back in the news. The Board of Directors of the bank led by Marco Morelli, reads a note, "has carefully analyzed a letter sent by Dr. Passera and received by the bank on 13 October which illustrates a non-binding proposal relating to the potential capital strengthening of the Bank. In this regard, the board of directors has given a specific mandate to the chief executive officer who has initiated further investigations”.
Broadly speaking, the Passera plan envisages the creation of a bad bank in which to place non-performing loans and the entry of new shareholders (the Americans of Atlas and Pimco Warburg) as an alternative to the capital increase. Passera too, like the current advisors JP Morgan and Mediobanca, aims to convert the current bonds into shares.
Another hot spot in the credit system: Unicredit. Polish sources quoted by the Wall Street Journal believe the imminent sale of Banca Pekao to the Pzu insurance company for 2,5 billion. However, the Italian bank has made it known that the negotiations are still on the high seas.
In Milan, the FtseMib index rose during the week by +1,1%, the result of two positive days (Monday and Friday) and three sessions in which worries prevailed over the next rate hike in the US and fears for China's slowdown. Among the best stocks, the Popolari shone: Banco Popolare +14,8%, Banca Pop. Emilia +12,8%, Banca Pop. Milan +7,2%, Ubi +6,4%.
MORGAN STANLEY: FCA CAN DOUBLE UP
The industrialists are weak: Stm -2%, worse than Fiat Chrysler -1,5%. The group led by Sergio Marchionne was judged by Morgan Stanley as the best automotive title in the world. The judgment remains Overweight, with a target raised to 11 euros from 10 euros, which recognizes on paper a 100% revaluation potential. The Jeep brand alone is worth twice the group's current capitalization. This was written by analyst Adam Jones, who estimates strong growth in Jeep sales globally and in particular in China.
The hearing of Harald Wester, chief technology officer of the Italian-American company, is expected today at the European Parliament's commission of inquiry into auro emissions.
