“I'm not at all enthusiastic about his willingness to raise rates. No, I'm not at all." Donald Trump thus enters with a straight leg on Jerome Powell's intentions and does so two days after the intervention that the Fed president will give at the Jackson Hole meeting, the venue chosen to announce the central bank's next moves. That is the third increase in the cost of money in 2018, justified by the increase in inflation (2,9% in July), the fall in unemployment (3,9%, to its lowest level in 20 years) and the health of companies: in in the second quarter alone, dividends of 497,4 billion were distributed worldwide.
But Trump does not like this move because it risks "hurting us while we are winning the battle of trade". The rise in the dollar favors "unfair competition" from China and the European Union, which, according to him, deliberately weaken their currencies. And as regards the next meeting between US and Chinese representatives on duties scheduled for tomorrow, the president froze his enthusiasm: "I don't expect anything special".
POWELL AT JACKSON HOLE TO REPLY TO THE PRESIDENT
What will be the impact of the president's outing? Powell, who assures that he has never received pressure from the White House, will keep going. The president himself said in an interview with Reuters that he will judge "Powell in seven years", however claiming the right "to judge the Fed" when he wants: "The results count, not independence". But within the Bank, as demonstrated by Raphael Bostic's departure from the Atlanta Fed, the party of those who fear that three increases in 2018 could cause too violent a slowdown in the economy is growing.
THE EURO RISES ABOVE 1,15. THE YUAN STARTS AGAIN
The president's words had an immediate echo. The dollar lost positions, while the euro immediately climbed back above 1,1544. Stronger this morning the movements on Asian currencies. The dollar-yen cross falls to its lowest level since the end of June at 110,1. The Chinese yuan appreciated for the fourth consecutive day at 6,84 against the dollar. The dollar-Indian rupee cross is also down, reaching an all-time high last week, above the 70 exchange rate: this morning we are at 69,6.
PEPSICO STOP ON NON-CARBONATED BEVERAGES
The interview with the President, released ten minutes before the end of the session, slowed the uptick of Wall Street, up until then buoyant: Dow Jones +0,35%, S&P +0,24%, Nasdaq +0,06% .
On the corporate front, the new absolute record of Nike (+3%) and that of Aestée Lauder (+3,4%), the cosmetics giant led by the Italian Fabrizio Freda, should be noted.
Carbonated soft drink giant Pepsico wants to acquire Israeli-based Soda Stream, the leader in home-made soft drinks, for 3,2 billion dollars.
The drop in the dollar, combined with the expectation of progress in the tariff negotiations, favored the rebound in Asian stock markets, especially those of China. CSI 300 index of Shanghai and Shenzhen stock exchanges +1,9%, Hong Kong +0,5%. The Japan Stock Exchange gains 0,5%.
The Indian stock market was flat, with the BSE Sensex index at 38.282 points. Citi advises caution on the Mumbai Stock Exchange, which has risen by 18% since the beginning of the year and is immune to the issue of trade wars: in a report released tonight, the broker confirms its medium-term target, at the end of March the BSE should be 37,300 points, a target that implies a drop of around 2,5%.
CYCLONE MADURO KILLS THE CURRENCY; INFLATION AT 80 THOUSAND %
Brent oil is little moved at 72,2 dollars a barrel. In the last three days it has always closed higher. The surreal debut of Venezuela's new currency also weighs on the markets: wages rise by 3.000%, but inflation is at 80.000%, with the prospect of rising to over one million percent. President Maduro has pegged the currency to his own cryptocurrency, the petro.
MOODY'S POSTPONES THE REPORT CARD: THE SPREAD MAY RISE TO 470 BPS
Italy remains at the center of attention of the financial world. The rating agency Moody's has decided to postpone the decision on a possible downgrade of Italy. The 2019 maneuver of the Conte government and the choices on the subject of reforms will be central, warns the agency, which recalls in a note that it had placed Italy's 'Baa2' rating under observation for a possible lowering on 25 May.
To a question on the possibility of exceeding the 3% deficit/GDP threshold allowed by European rules, undersecretary Giancarlo Giorgetti replied on the sidelines of the meeintg in Rimini: "I don't rule out anything", because the collapse of the viaduct on the A10 last Tuesday “it gave a shock to the entire Italian political class, as well as to public opinion, with respect to the fact that we have infrastructure assets in serious maintenance deficit. A difficult negotiation will begin [with Europe], we know that, but it is a negotiation that we intend to carry out because we think we are right”.
According to the Aberdeen fund, the market is currently discounting a deficit/GDP ratio of 2019% for 2, compared to the 0,8% indicated in the previous government's forecast. On average, the large brokers expect that any exceeding of 3% would push the spread to around 470 basis points, if instead it were to remain around 3% there would be only a modest increase, around 300 basis points. If, on the other hand, the government were to remain below 2%, it could return to around 200 basis points. Goldman Sachs believes that if there is room for electoral promises in the finance law, the GDP deficit will rise to around 7%.
BALANCE PLACE INTERRUPTS THE NEGATIVE STREAK
Against this backdrop, the Milan Stock Exchange started the week with a rise of 0,27%, to 20.471. The rebound interrupts a negative streak of seven consecutive sessions, in which the index has accumulated a loss of 6,5%.
The prospect of the resumption of dialogue on trade between the US and China favored the other lists, which rose (unlike Piazza Affari) throughout the session. Frankfurt shines (+0,99%). Paris (+0,65%), Madrid (+0,54%) and London (+0,46%) also performed well.
Italian paper recovering on the Bund: the spread fell to 270 points, the yield of the 10-year BTP to 3,02%, from 3,09% on Friday.
GIORGETTI HOLDS BACK ON THE CONCESSION OF ATLANTIA
Atlantia's descent continues (-4,68% to 18,44 euros), awaiting today's board meeting. The stock which, however, closed the day above the lows after Giorgetti's words: "I don't see the terms" for a law to revoke the concession, said the undersecretary, adding that however "it is necessary that the agreement be reviewed: the margins of profitability that I see compared to the conventions seem disproportionate to me". As for the nationalization of highways, he explained that he is not "very convinced that direct management by the state would be more efficient".
Stocks owned by the other major concessionaire, the Gavio group, also fell: Sias lost 4,2%, Astm 3,6%.
FCA STARTS AGAIN: MAGNETI MAY BE WORTH 7,6 BILLION
Strong rebound for Fiat Chrysler (+3,21% to 14,17 euros) after the recent declines that pushed the stock to its lowest level in the last 15 months, reached last Friday at 13,40 euros. According to Bloomberg, Magneti Marelli may be worth up to $7,6 billion, including debt, based on peer comparison, and could achieve a high credit rating by going public. Analysts calculate that the auto parts supplier could generate more than $2 billion in dividends for Fiat Chrysler, which can be used to reduce debt or build intragroup extraordinary finance deals. Ferrari (+1,52%) and Exor (+1,99%) also recovered.
CAMPARI, SALINI AND DIASORIN FLYWHEEL
Campari stands out (+2,84%) after setting a new historical record at 7,88 euros. Since the beginning of the year (+20%) it has been one of the best blue chips in Piazza Affari. The uptrend is supported by the strength of the results. Campari closed the first half of 2018 with an adjusted net profit of 104,4 million euros, up by 11,6%, and organic sales growth of 5,4%.
Among the best in the list also Salini (+5,04%). The construction group, through its American subsidiary The Lane, was awarded a contract for the design and construction of the I-10 Corridor Express Lanes in California. Lane Construction Inc announced the sale of the Plants & Paving Division to Eurovia SAS, a Vinci Group company, for a total cash consideration of $555 million.
Diasorin takes off (+7,20%) after Berenberg raised the target price to 96 from 86 euros.
Italian banks are weak: the sector basket falls by 0,33%. The big Intesa and Unicredit mark a decline of 0,62 and 0,25%.
Aedes +7,04% after the recent decreases. The company said it was not aware of any facts or events justifying last week's stock performance.
The first day of the championship, even if with decidedly reduced volumes, rewarded Roma (+0,78%), while Juventus (-0,05%) are down slightly despite the victory over Chievo. Lazio -3,42% later the defeat against Naples.
