Ratings, banks and above all Fiat Chrysler. These seemed to be the main themes for Piazza Affari, returning from a weak week (-0,88%). Then, completely unexpectedly, came the news of the century: Luxottica, the world leader in eyewear, announced the merger with the French company Essilor, in turn the leading lens manufacturer on the planet. In figures, an agreement worth 50 billion euros, which is one of the most important transnational mergers ever.
31% OF THE OLD CAPITAL, BUT THE FUTURE IS FRENCH
Leonardo Del Vecchio will be the number one shareholder, with 31% of the capital, and will occupy the position of executive chairman. The current CEO of Essilor, Hubert Sagnieres, 61, will be the executive vice president. The objective of the new group is to consolidate its leadership on the Asian market, the most promising in terms of prospects. The agreement, the result of a long negotiation initiated by the French, will allow Essilor to grow, after various markets, also in the retail sector.
Leonardo Del Vecchio, 81, will instead guarantee the future of the group he created from scratch. According to the Financial Times, the new giant will be listed in Paris, confirming the only weak point, seen from Piazza Affari, of an almost perfect operation, which removes any doubts about the governance of the Luxottica group, until this morning the only company Italian leader in a sector: Del Vecchio's successor, who in recent years has tried and rejected three directors (starting with Andrea Guerra) will be French, as the trend of the moment dictates.
BANKS AND BTPs ATTACKING THE RATING CUT
In addition to the probably positive response of the markets to the Italian-French merger, the reaction to the decision of the Canadian rating agency Dbrs to cut the Italian debt rating to stable BBB will need to be monitored, thus aligning with the other international agencies that had already withdrawn the rating "A" to the Italian State.
The loss of the "A" for Italy makes it more difficult for Italian banks to deposit government bonds as collateral with central banks in order to obtain liquidity in exchange. It is difficult to assess the real impact in the short term: in theory something like 30 billion of liquidity could fail in the credit system. In reality, according to the Bank of Italy, the cut would have a limited effect because the banks make limited use of public debt securities as collateral in ECB operations.
But on a political and psychological level the novelty is destined to aggravate the fragility of the system, grappling with the weight of suffering. In terms of non-performing loans, data from the Monetary Fund in hand, in the second quarter of 2016 the share of NPLs in the belly of Italian institutions was equal to 17,5% of total loans disbursed, against 3,9% in France, l 1% of Great Britain and 1,4% of the USA.
In this context, the markets await the presentation of the saving-saving decree in Parliament and the definition of the industrial plan of Monte dei Paschi. The related bailout decree is expected within days with the signature of the Minister of the Economy, Pier Carlo Padoan. On Wednesday there will be a hearing of the top management of Rocca Salimbeni in the Senate Finance Committee.
GERMANY GOES TO ATTACK FIAT CHRYSLER
Meanwhile, the size of the Fiat Chrysler dieselgate is growing. After the protests of the EPA, the American environmental agency and the opening of a proceeding by the US Ministry of Justice, the German Minister of Transport, Alexander Dobrindt, took the field and did not miss the opportunity to go on the attack against the industry of the Bel Paese.
"The Italian authorities have known for months that FCA, in the opinion of our experts, used illegal shutdown devices," the Berlin minister accused in an interview with Bild on Sonntag, asking the EU to impose the withdrawal of some models of the group for the hypothesis of a use of irregular software for testing. The Minister for Development, Roberto Calenda, replies dryly: "Take care of Volkswagen".
For Fiat Chrysler, another eventful day is looming on the price lists: Fitch (Fca BB- rating, positive outlook) has announced a possible downward revision in the event of a heavy fine imposed by the US authorities. We previously identified weak cash flow generation as a major credit weakness for the group. While we expect underlying cash generation to strengthen over the next two to three years, a multibillion-dollar cash outflow could renew pressure on the rating or positive outlook.
Meanwhile, another blow to diesel technology has arrived: the city of Oslo has decided to ban the circulation of diesel engines in the city walls.
LONDON DEVALUES TO ANTI-EURO
Geopolitics promises to be the great protagonist of the markets in the week of Donald Trump's debut.
The pound was under fire this morning on the Asian markets, slipping below 1,20 against the dollar on the eve of the start of negotiations between London and Brussels on the modalities of the British divorce from the EU. The words of the British Foreign Minister Philip Hammond weigh heavily: "If the EU imposes too harsh conditions on us, Great Britain will drastically lower taxes to attract businesses".
Trump yesterday praised Brexit: "We will do great things with the United Kingdom," he said. Instead, a harsh attack on Germany and in particular on BMW for investments in Mexico. All this on the eve of the start of negotiations between London and Brussels.
Meteo Borsa expects a new rise for the London Stock Exchange, favored by the weak pound. Declining opening instead for the German market and, consequently, for the EU price lists.
ARREST ORDER FOR THE SAMSUNG HEIR
Asian markets were also down this morning amid fears that the US president would launch retaliation against Beijing, accused of unfair management of the exchange rate. The Tokyo Stock Exchange fell (-0,6%), as did that of Shanghai (-1,4%).
Sensational developments in the investigation by the Korean judiciary for the bribes against President Park Geun Hye. The judge ordered the arrest of Lee Jae Yong, the heir to the fortune of the Samsung dynasty, the current head of the group (among other things, adviser to Exor). The accusation is that he bribed the president in exchange for favours.
DRAGHI AND YELLEN ON THE FIELD, XI JINGPING'S FIRST TIME
Short but intense week for the American markets, closed today for the Martin Luther King Day holiday. In anticipation of Donald Trump's inauguration ceremony at the White House on Friday 20, from Wednesday 17 the spotlights will turn on the meeting in Davos, the festival of globalisation, jeopardized by protectionism. In the meantime, a new "bomb" exploded on the eve: the Kremlin is reportedly working on the organization of a forthcoming summit between Vladimir Putin and Trump.
The absolute protagonist of the Davos meeting, which will be attended by more than 70 government leaders from all over the world, will be Chinese President Xi Jingping, who will have to inaugurate the meeting dedicated to "sensitive and responsible leadership". Four objectives at the center of the meetings: strengthen global collaboration; relaunch growth; reform capitalism and transform work under the impact of the digital revolution. The new estimates from the International Monetary Fund are also arriving this week.
The most important monetary policy appointment concerns the first meeting of the ECB directorate of 2017, scheduled for Thursday 19. The markets are not expecting news after the central bank in December extended the expected purchase program by nine months to next September from Qe (albeit reduced to 60 billion/month since March). But the recovery of inflation, especially in Germany, has unleashed German pressure: Wolfgang Schaeuble has asked Mario Draghi to review the expansionary policy as soon as possible.
The time is also approaching for a possible new increase in US rates, which could draw fuel from the data on price trends, which should show an acceleration in December (driven by petrol). The minutes of the latest Fed meeting, which will be published on Wednesday evening, should also be followed.
For this reason, the markets will closely follow the speech that Fed Chair Janet Yellen will give Wednesday in San Francisco on "monetary policy goals and how to achieve them". She replies the next day at Stanford University on the "economic scenario and monetary policy choices". Despite the strong recovery in employment, it is unlikely that the Fed will proceed with a new increase before more precise indications from the Trump administration.
THE QUARTERLY REPORTS OF GOLDMAN SACHS AND CITI ARE HERE
The market will be absorbed during the week by examining the accounts of about thirty companies in the S&P 500 basket. The expectation concerns above all the financial sector, the most effervescent after the elections: the Morgan Stanley data will be announced (Tuesday), Citigroup and Goldman Sachs (Wednesday). Netflix, IBM and General Electric are also under scrutiny (Friday).
THE UNICREDIT INCREASE AT THE PIAZZA AFFARI EXAMINATION. THE UBI EXPLOIT
The first reaction of the market following the approval on Friday by the shareholders' meeting of Unicredit's capital increase proposal for 13 billion should also be followed. The operation, said the CEO Jean Pierre Mustier, will start in the first few days of March, before the payment of the bond scheduled for March 10th. The participation, he added, "will only be financial and not industrial, that is, it will not be the prelude to mergers or acquisitions".
Eyes also on the possible follow-up to the Ubi rally, which posted a +14,17% after presenting the binding offer to buy three of the four banks "cleaned up" after the resolution at the end of 2015 (Etruria, Marche, CariChieti).
