Long lines of Mexicans who live and work in the US made a quick return home yesterday to vote for Manuel Angel Lopez Obrador, who is on his way to winning the election by a large margin, the first leftist president since Cardenas (1934). Or, as an immigrant interviewed by Reuters said yesterday, “the only one who can stop Trump. Otherwise, all we have left is God." Perhaps the markets think so too: this morning, as election projections confirmed the landslide victory of the leader who promises to fight the mafia and drug cartels, the Mexican peso gained positions. Trump, for his part, has already announced that he wants to review the rules on car imports from his southern neighbor as soon as possible.
CHINA AND JAPAN LOSE BLOWS
The threat of tariffs and the problems of migratory flows are destined to dominate the geopolitical scene on both sides of the Atlantic also in the first week of July, broken in half by the pause of July 4, the US independence day.
Even in Asia, after the strong progress of last Friday's price lists, pessimism has returned to dominate, justified among other things by the disappointing performance of the Caixin, the non-government index of economic activity. The index of the Shanghai and Shenzhen Stock Exchanges dropped by 1,3% this morning. On Friday, barring surprises, duties of 34 billion dollars will be implemented on imports of Made in China products into the USA.
Tokyo was also in the red (-0,5%) in the wake of the slowdown in the Tankan, the most accurate thermometer of the Rising Sun's economic activity.
OIL, ARABIA READY TO PRODUCE MORE
It slows down, but not too much, oil. Saudi Arabia has responded to the US request to increase production by two million barrels to contain the increase in prices, favored by the collapse of deliveries from Venezuela and Libya. This morning Brent traded at 78,71 dollars (-1,06%), US crude at 73,21. However, the week ended with an increase of between 7 and 8%.
SEEHOFER'S RESIGNATION WEIGHT ON THE EURO
The Eurozone front is even hotter: Friday's optimism at the end of the meeting of the European Council gave way to new worries, in the face of the prospect of a political crisis in Germany. The interior minister, the leader of the Bavarian CSU Horst Seehofer, has resigned from the government and from the party, giving up a "useless" meeting with Angela Merkel. At the origin of the tear the refusal of the Chancellor to proceed with the immediate pushbacks of migrants across the border.
The euro dropped this morning to 1,1662 against the dollar. An opening in the red of 0,6/0,8% is expected for European lists, including Piazza Affari.
EUROZONE PMI DATA COMING SOON
The tile on the Berlin government falls at a delicate moment in the economic situation of the Old Continent. This morning the PMI indices on manufacturing will allow us to take a snapshot of the extent of the slowdown taking place in the main economies of the area.
The tough confrontation with the US on tariffs for steel and aluminum has already had an effect on the European steel industry. Today the markets will be called upon to express themselves on the agreement between the Thyssen Group and Tata Steel which will start off a group smaller, in size, only to Arcelor Mittal.
THE EU TO TRUMP: DUTIES ON CARS RISK 300 BILLION
However, the operators' attention will be focused on the car duties issue. The European Commission has presented a curt and detailed warning to Washington on the consequences that the US decision to raise tariffs on cars arriving from Europe (especially from Germany) could have: the decision, we read, could provoke reprisals on the US for 300 billion dollars and put 4 million jobs at risk. Donald Trump replied as follows: "Europe behaves just as badly towards us as China, even if it is smaller".
Vehicle sales figures for Italy and the United States will be released today. The sector index in Europe recorded a drop of 12% in the last five sessions.
THE DIGNITY DECREE IS STARTING, TOMORROW THE TRIA PLANS
In Italy, on the economic policy front, the key event of the week will be the hearing of the Minister of Economy, Giovanni Tria, in the joint Budget commissions of the House and Senate to illustrate the programmatic lines of his dicastery.
Today in the Council of Ministers should kick off the Dignity Decree.
THE PRYSMIAN INCREASE IS UNDERWAY. RECORDATI DRIDBLE THE TAKEOVER OFFER
In Piazza Affari, eyes are on the launch of Prysmian's capital increase, linked to the purchase of the American General Cable: the company has established that the new shares (2 out of every 15 already owned) will be issued at a price of 15,31 euros , for a total value of approximately 499,91 million euros.
The reaction of the market to the transfer of control of Recordati to the English private company CVC should also be followed. The modalities of the deal in fact represent a cold shower for the expectations of the operators. The private individual has in fact offered all family members the possibility of reinvesting in the vehicle which, by taking over control of Fimei, will launch a cascade takeover bid on the entire group which capitalizes 7,1 billion.
The takeover bid, however, was set at 28 euros per share, at a significant discount on the 34 euros at Friday's closing. It is assumed that no one will deliver the shares, therefore, and the company will remain listed. CVC has also announced that if between today and the day of the launch of the offer the title falls by 20% below the established 28 euro, it will adjust the price downwards.
FED MINUTES AND EMPLOYMENT DATA AFTER INDEPENDENCE DAY
Week broken in half for the US stock exchanges, shut down on Wednesday for Independence Day. The key appointment, next Friday, will be the data relating to employees. According to estimates, 198 new jobs should have been created in June against 223 in May. But the unemployment rate should remain unchanged at 3,8%. In the spotlight the increase in payroll, expected at 0,3%.
Following the publication of the Fed minutes, indications will arrive on Thursday on the roadmap for the next US rate hikes. But some signs taken up by members of the board (including James Bullard) suggest that in recent days concerns about the stability of the economy have grown: the flattening of rates is worrying, a signal that often anticipates the arrival of a recession.
The week ends with a drop of about 1%, the quarter of 3,4%.
The Frankfurt Stock Exchange, with approximately +1,3% today, closed the week with a drop of 2%, but the quarter was positive (+2%). In the period May 31 – June 30, the Cac40 of Paris marks a rise of 3,8%, -0,8% per week.
The protagonist of the second quarter is the dollar, which is strongly appreciating: the Bloomberg index which puts the US currency in relation with the ten main ones on the planet, gains almost 5%. But even oil, +2% today, moved a lot, +12% in the quarter. The Stoxx index of oil & gas companies in Europe marks a rise of 15%. Negative period for the automotive (-12%) and for banks (-9,5%).
