There are signs of moderate tension. After an excellent start to the year, Piazza Affari is starting to close the financial week in last place among the Eurozone lists: -0,1%, against +1,2% in the Eurostoxx index. The spread between BTPs and Bunds recovered to 137 points, far below the peaks reached during the 2011/12 crisis. However, Jean-Claude Juncker's warning about the risk of a "non-operational government" in Italy after the vote brought the Italian risk, hitherto largely snubbed by the markets, topical.
What will happen from here to the vote? It is reasonable to expect a moderate increase in tensions, more on the domestic front than from international speculation. But a massive attack on the Bel Paese is discouraged both by the abundant liquidity available to the ECB and by the strength of the economic recovery, led by industry. Above all, Spain seems to be taking advantage of the uncertainty, by now the darling of operators who are betting on a reduction in the yield gap in the Eurozone.
Meanwhile, globally, Fed bankers are undertaking to reduce interest rate risk, as has emerged from the recent increases in the bond market. The rate hike should not undermine the recovery, warned yesterday James Bullard, president of the Saint Louis Fed. And the markets, excited by new positive signals from the US economy, have enthusiastically welcomed the message. The dollar and oil are rising again, while the risk of a currency war feared by the ECB minutes is receding.
BLITZ IN CHINA AGAINST THE COLOSSUS ANBANG
In this climate, all things considered calm, the Chinese authorities were able to carry out the blitz against the financial giant Anbang Insurance without too many complications, which holds control of car groups such as Shanghai Automotives and energy groups such as Sinopec, as well as having bought the Waldorf Astoria of New York. Despite founder Wu Xiaohui's arrest for fraud, the Shanghai and Shenzhen exchanges closed in parity.
Other Asian markets rose. In the final session, Tokyo's Nikkei index gained 0,4%, while the yen, which rose 1% against the dollar yesterday to 106,7, weakened this morning to 106,9. Hong Kong climbs 0,8%. South Korea +1%, Australia +0,7% and India +0,3% advance.
MNUCHIN: INFLATION IS NOT SCARY
The bond markets settle down. But the tide remains high: the Treasury Bill traded at 2,92% this morning and the two-year yield remains close to the highs of the last ten years.
Last night, US Treasury Secretary Steven Mnuchin said in an interview that the Trump administration will be able to raise American wages without affecting inflation.
The Dow Jones (+0,66%) and the S&P 500 (+0,10%) rose on Wall Street under the push of the super-index data, which also grew in January after the excellent results of the previous three months. The figure increased by 1%, to 108,1 points, more than expected by the experts (+0,6%). The figure was up 0,6% in December and 0,4% in November. Claims for unemployment benefits fell by 7. The Nasdaq marks time (-0,11%), on the fourth consecutive day of decline.
RECORD OIL, TENARIS FLIES TO MILAN
WTI oil rose to $62,7 a barrel and Brent by 1,36 to $66,31 a barrel: US crude inventories surprisingly reduced by 1,6 million barrels against forecasts an increase of 3 million barrels.
The energy index +1,08% was the most lively: Exxon Mobil +1,9%. In Piazza Affari it rose after the accounts Tenaris (+3,3%), which closed the fourth quarter of 2017 with earnings per share of 0,14 dollars, above analysts' expectations (0,10 dollars), thanks to the contribution of investments and for tax recoveries. Adjusted Ebitda of $319 million, up 77% year over year: consensus at $295 million. The pipe producer expects a growing 2018: the stock revived after the US Commerce Department invited the White House to impose price controls on steel and aluminum imported from Asia and Europe. Eni loses 0,5%, Saipem +0,4%.
BITCOIN (-5%) IN THE SIGHT OF PARIS
Bitcoin loses 5%, returning below $10.000. Once again the grip of the authorities weighs. In France, the Authority for the financial markets has established that online trading platforms for cryptocurrency derivatives fall under the European MiFid II regulation and are therefore subject to more stringent standards.
EUROPE, ONLY BUSINESS PLACE AND LONDON IN RED
Wall Street's good tone led European equities to recover almost all losses in the afternoon. The exceptions are London, depressed by the bad Gdp data in the fourth quarter, and Milan, affected by the negative comment by Juncker (“I'm worried about the Italian elections, we have to prepare for the worst case, ie the absence of an operational government”), which has accentuated the downward pressures also on Italian stocks, in a day of recovery for core European bonds.
Piazza Affari was the worst market. Since the beginning of trading, the index has been in negative territory and then widened the losses up to -1,5% (minimum at 22.269) only to then halve the drop to -0,84% at 22.463 points.
The other European stock exchanges were calmer: Frankfurt lost 0,11%. On the other hand, Paris was positive, with the Cac up by 0,18%. London, on the other hand, was negative (-0,48%). Fourth quarter 2017 GDP was revised downwards to 0,4%.
THE ECB IS NOT CHANGING COURSE. WARNING TO THE USA ON THE DOLLAR
There was no shortage of tensions, but in the end the members of the board of the European Central Bank deemed it premature to change the monetary policy message to signal its imminent normalization, despite the growing confidence in the rise of inflation towards the target. This is what emerges from the minutes of the monetary policy council of 25 January, which indicate the possibility of an adjustment of the message in the first part of 2018, underlining the need to avoid sudden subsequent course corrections and to monitor the effects of the appreciation of the 'EUR. I stand by the warning to the US against the temptation to devalue the dollar.
Meanwhile, the council of ministers, on the proposal of the president Paolo Gentiloni, having acquired the opinion of the competent parliamentary commissions, has conferred on Mario Nava the office of president of Consob.
THE SCISS WITH THE BUND IS WIDENING. TUESDAY 7,5 BILLION BTP
The Juncker effect weighed on the bond market in the afternoon. The spread between 10-year BTPs and Bunds widened to 136.70 points, +2,86% after reaching 139 bps one morning, with a yield of 2,08%. The German Bund appreciates, with the yield falling below the psychological threshold of 0,70% yield.
The situation was also complicated by the eve of the Italian Treasury auctions. We start today with the offer of 1,5-2 billion of the October 2019 CTZ and the same total amount of the May 2022 and May 2028 Btpei. At the end of the session, the October 2019 Ctz, in auction tomorrow, offers a yield in the area - 0,130%, which if confirmed in the auction would represent the highest level since May of last year.
On Monday it will be the turn of the placement of the six-monthly Bots for a total of 6 billion. Finally, on Tuesday, the Ministry of the Economy will make available to investors between 5,75 and 7,75 billion euros in medium-long term securities in the auction scheduled for Tuesday 27 February, including the new 5-year BTP March 2023 The latter, which will pay off a coupon of 0,95% against 0,90% of the current August 2022 benchmark, will be made available for 3-4 billion euros.
The 10-year BTP in February 2028, proposed for an amount between 1,5 and 2 billion euros, and the CCTEU in April 2025, made available for 1,25-1,75 billion euros, will also be reopened.
UNICREDIT: IN THE EVENT OF LARGE AGREEMENTS SPREAD TO 110 BPS
According to a UniCredit study, if the Italian elections produce an executive with broad understandings between pro-euro parties, a scenario to which a 45% probability is attributed, the spread could narrow towards 110 points. In the event of a return to the polls (20% probability) or a government of anti-establishment forces (10% chance) the differential could push towards 200 basis points.
In the same report, UniCredit points out that despite the uncertainty regarding the outcome of the vote and the increased risk that the ECB's quantitative easing will end in September, the risk premium of the BTP over the Bund has actually shrunk by about 25 bp since the start of the year. This is due to a number of supportive factors, including solid and synchronized global growth and a level of liquidity that remains ample.
THE UTILITIES RAISE THEIR HEADS, TELECOM DECIDES ON PERSIDERA
Few stocks against the trend in a day dominated by declines. Among these stands out A2a (+3,29%): Kepler Cheuvreux has raised the recommendation from hold to buy, with the target price revised upwards from 1,5 to 1,7 euros. The rise in energy prices also favored the recovery of Italgas +1,76% and Snam +1,06%. Enel +0,3%.
Among the utilities in decline instead Telecom Italia (-0,4%) on the eve of the Board which will have to negotiate the sale of Persidera, the multiplex company in which Telecom has the majority (30% belongs to Gedi). RaiWay-F2i have put about 250 million on the plate, a figure considered too low by Gedi. Telecom, according to what the antitrust decided against Vivendi after the acquisition of the shares in the Italian group, must start the sale or listing or alienation operation in a trust by the end of February.
Meanwhile Mediaset (+0,6%) rejected the proposed agreement with Vivendi. The parties will meet in the arbitration room on February 26, a settlement of the dispute on Mediaset Premium seems very unlikely. Equita reiterates the hold judgment, target price at 3,5 euros.
Atlantia -0,7%, could bring the offer for Abertis above 20 euros per share.
FIXED INCOME SCARES BANKS
The entire banking sector was negative, which suffered from the rise in the Btp/Bund spread. The Italian index of the sector falls by 1,5%, against -0,37% of the European one. All stocks went down with the exception of Carige +2,53%.
For the rest, Intesa (-1,28%) and Mediobanca (-1,21%) fell back, the decline of the other banks was more robust: Unicredit -1,97%, Banco Bpm -2%, Bper -1,99% and Ubi -1,66%.
Among other financials, UnipolSai was also in the red (-1,92%) which launched a 2 million euro Tier500 bond. Unipol sells 3,45%.
Generali, -1%, said it will invest more in green businesses and reduce exposure to coal companies. Little move Banca Generali -0,29%: Banca Imi confirmed the add recommendation and the target price at 32,8 euro after the solid quarterly.
PARTNER RE BRAKES EXOR (-2,75%)
Reductions for the automotive sector: Fiat Chrysler-2% and Ferrari-2,09%, are worse than the European sector. Cnh Industrial -1,7%. Commercial vehicle registrations in Europe rose 8% in January.
Exor is also bad (-2,75%). The subsidiary PartnerRe announced an operating loss of one million euros in 2017 from a profit of 289 million in 2016.
THE EU GIVES A BOOST TO RENEWABLES
Igd, +6% to 8,65 euros, accelerated after the publication of the 2017 accounts. The group closed the year with a net profit of 86,5 million euros, up 26,5% compared to 68,3, 2016 million in the same period of XNUMX.
The renewable energy sector is in strong evidence. The European Union has raised its targets to 2030. This is positive news for all the shares in the sector listed on Piazza Affari. Erg advances +2,29% on which Equita Sim raised the target price to 20 from 16,6 euros, confirming the buy recommendation. The broker also rewarded Falck Renewables (+3,45%): from hold to buy, with the target price rising from 2 to 2,3 euros after the 20% reversal from the peaks.
