As expected, US rates are up by a quarter of a point. But in 2017 there will be three increases, one more than expected a month ago. So the Federal Reserve decided at the last meeting of the year. In short, a mini-squeeze is looming which will have to accompany the turnaround of the Trump era, which will be full of tax cuts and fiscal policy incentives. But yesterday's increase only confirms the favorable situation in the economy. “My colleagues and I – said Janet Yellen – have taken note of the excellent progress of the economy. And we expect things to continue like this."
Unemployment is stuck at 4,6%, a low, and here and there (builders in Philadelphia, hi-tech workers in Texas, truck drivers in Kansas City) there is a shortage of manpower. Wages continue to rise (albeit slowly): growth is around 2%. “An ideal situation, neither too hot nor too cold,” comments the New York Times. But that's not enough for Trump. The new president, who once received the greats of the new economy, wants the economy to accelerate to 4%. And the Fed complies, gearing up to avoid a skid.
AFTER THE FED THE DOLLAR RISES, THUMP OF OIL
The markets, faced with the prudence of the Fed, slowed down. After all, as an operator explained to Reuters, "we ran so much that any excuse is good to take a breather". Wall Street down: Dow Jones -0,6%, S&P 500 -0,81%. The Nasdaq, on the day of the meeting of the New Economy leaders with Trump, dropped 0,5%.
The dollar strengthened (euro -0,5% to 1,0573, yen +1% to 116,28), while the 2-year T-bond, the most sensitive to interest rate trends, rose by 6 bp, to 1,23%, the highest since August 2009 (before the collapse of Lehman Brothers). The 2,52-year trades at 4%. The rise of the US currency, together with fears of an increase in the production of US shale oil, caused a 2,2% plunge in oil, the worst since July. Exxon (-500%) was the worst stock in the S&P XNUMX index.
In Piazza Affari Eni closed down by 0,3% despite three brokers having raised their target prices. Jefferies (confirmed Hold) raised from 12,25 to 13,25 euros, Rbc (confirmed Outperform) from 17 to 18 euros and Credit Suisse (confirmed Outperform) from 15,5 to 15,9 euros.
BRICK CRISIS IN HONG KONG (-2,3%)
The Tokyo Stock Exchange is starting to close up 0,3% this morning. The Hong Kong stock market is down sharply, where the Hang Seng index loses almost 2%, especially the companies in the real estate sector. The Shanghai Stock Exchange loses 1,0%, little moved Seoul and Mumbai.
Profit-taking also conditioned the European stock exchanges pending the Fed's decision. Milan too is slowing down after the robust rally (+16% in the last six sessions). The Ftse Mib index (-1,18%) closed at 18.606 points. The other European Stock Exchanges were also weak: Paris -0,5%, Frankfurt -0,1%. Leading the decline throughout Europe were bank securities (Stoxx -1,1%).
In October, the industrial production price index in the euro area fell by 0,1% on a monthly basis, while it grew by 0,4% in the USA. The economy is improving but uncertainty and the increase in the risk of poverty hang over the confidence of Italians, warned the Sudi Center of Confindustria: the gross domestic product for 2016 increased by 0,9% in 2016 (+0,7% in September), by 0,8% in 2017 (+0,5%) to reach +1% in 2018. But the risks for the next two years are far from averted.
The 10-year BTP closed the day with a yield of 1,79% (from 1,87% yesterday). Spreads down to 149. New tensions on Greek bonds: the Greek 7,347-year yield has risen to XNUMX%. The ESM bailout fund suspended Greece's short-term debt support deal after Athens offered to make a one-off payment to retirees in December.
BERLUSCONI: "WE WILL NOT BE REDUCED"
The spotlights were on Mediaset throughout the day: +1% with very strong trading (7% of the capital). Vivendi announced in the evening that it had reached the 20% threshold. "The purchase of Mediaset shares by Vivendi, not previously agreed with Fininvest, cannot be considered anything other than a hostile operation", it was the reaction of Silvio Berlusconi, who underlined the "most absolute unity of my family on a very precise point: we have no intention of letting anyone try to downsize our role as entrepreneurs".
Fininvest, after presenting a complaint for market manipulation to the Milan prosecutor's office (which opened a file), continued with the share purchases, rising to 38,2% of the capital (39,7% of the voting rights). Meanwhile, the Government took the field: "A hostile takeover is not the most appropriate way to strengthen one's presence in Italy," said the Minister of Economic Development, Carlo Calenda. The Government, he added, "will carefully monitor the evolution of the situation".
But it is not clear what measures the government can adopt to deal with the offensive of the French raider who, in the event of a takeover bid, should extend the offer not only to Mediaset (4,3 billion stock market value) but also to Ei Towers (+3,8%) and Telecinco, adding at least another two billion. Telecom Italia, which is willingly or unwillingly interested in the dispute over Mediaset (Vivendi is the leading shareholder of the telecommunications company), fell yesterday by 0,2%.
THE ECB TO MPS: USELESS, EVEN HARMFUL REFERRAL
Leading the decline throughout Europe were bank securities (Stoxx -1,1%). Weak Monte Paschi (-2%) pending the approval by Consob of the extension of the exchange of subordinated bonds in shares to the approximately 40 thousand retail investors who have securities in their portfolios worth 2 billion euro. In the meantime, the letter from the ECB has arrived on the refusal of the extension of the capital increase.
The postponement, we read, "could lead to a further deterioration of the liquidity position and a worsening of capital ratios, putting the survival of the bank at risk". Furthermore, in Frankfurt's opinion, waiting about twenty days would not guarantee a more favorable market context, such as to allow for a guarantee agreement with the banks in the consortium.
UNICREDIT SLOWS DOWN, ECB EXTENSION PUSHES CARIGE
Unicredit corrects downwards (-6,4%), after the strong gain on Tuesday (+16%) which coincided with the presentation of the new business plan. Rbc has raised the recommendation from perform to outperform, with the target price rising from 2,5 to 3,1 euros. Banca Carige made a strong recovery (+6,01%) after the ECB granted a one-month extension to the presentation of the strategic plan to the ECB. Banco Popolare (+1,5%) and Mediobanca (+0,9%) are also in positive territory. Intesa closed down (-2,6%). In the insurance sector Generali lost 1%, Unipol -0,3%.
WELL TOD'S, IT STILL SUFFERS THE AMPLIFON
In the rest of the list, the main industry stocks were down: StM -0,2%, Fiat Chrysler -0,3%, Leonardo -0,3% and Prysmian -1,1%. Italgas +0,17%: Bank of America – Merrill Lynch has started hedging with a buy rating and a target price of €4,3. Enel falls by 1,1%, Terna (-0,9%) and Snam (-1,5%) are also weak.
In luxury, Moncler lost 2,3% despite the promotion of Kepler Cheuvreux which raised the target price of 18,5 euros from 17 euros, confirming the Buy rating. Strong increase in Tod's (+3,5%). Amplifon suffers (-6%): HSBC cut its rating to "hold" from "buy", bringing the target price to 9,2 euros.
