The reduction of the Fed's balance sheet will have to begin within a few months. By the end of the year or, as some board members ask, already at the end of August. This is what emerged from the minutes of the last meeting of the Central Bank, marked, according to what we read, by substantial divisions among Janet Yellen's collaborators. Under the compactness demonstrated during the rate increase at the beginning of June (8 votes in favour, 1 against), opinions are divided on budget cuts. Some believe that we should start as soon as possible, others fear that such a choice would be interpreted by the market as an abrupt and rapid change of course, in stark contrast to the philosophy adopted so far at the central bank.
Another uncomfortable reality also emerges from the minutes: some bankers (perhaps the majority) are convinced that the stock market has risen too much. In short, an open discussion is underway at the Fed on the timing and methods of the stages of the rate hike. A bit like the ECB, after all. The direction seems clear but too rapid action risks jeopardizing a recovery already complicated by growing geopolitical tensions.
EU-JAPAN DUTY AGREEMENT
The slow but progressive change of course coincides with an increasingly turbulent geopolitical situation. The Korean crisis is approaching heights never touched in the past, while the confrontation between the US and the unprecedented couple China and Russia, opposed to new sanctions against Pyongyang, is sharpening.
Germany-led Europe is starting to accuse Washington's protectionist impulses at the G20: today, on the eve of the G20 in Hamburg, where anti-globalization legions are converging, the EU will sign a historic agreement with Japan: Tokyo will to drop the duties on food, Europe those on the cars of the Rising Sun. A bad blow for the United Kingdom, so far the focus of four-wheel investments by Toyota and Nissan.
CHIPS TO THE STARS AT WALL STREET, STM STARTS AGAIN
The Asian stock exchanges are weak: the Korean crisis weighs heavily, but also the bullish signals that emerged from the Fed minutes. The Japanese stock exchange is starting to close this morning down by 0,2%. Shanghai also fell by 0,2%, Hong Kong -0,3%, Mumbai +0,2%, Seoul +0,1%.
Wall Street's financial week opened, after Independence Day, with a strong rise in tech: the Nasdaq closed up 0,67%. Flat the Dow Jones (-0,01%), S&P 500 +0,15%. The euro-dollar exchange reacted mildly to the Federal Reserve's announcements.
The bonds are slightly more lively. The yield on the two-year Treasury Bill fell slightly to 1,39%, not too far from the highs of the last 11 years. 10-year Treasury yield at 2,33%, from 2,35% at the close.
The chips sector was in great evidence: the Philadelphia semiconductor index rose by 2,1%. Intel (+2,6%) was the best stock in the Dow Jones index.
In Piazza Affari the recovery of Stm (+3%) held the scene after three weeks of decline (overall loss of 6%).
RUSSIA DOESN'T WANT ANY MORE CUTS. ENI AND SAIPEM DOWN
The sharp fall in the energy sector also conditioned the session under the pressure of the drop in oil prices: -4% for Brent at around 48 dollars (this morning at 48,2 in ASI), Wti at 45,30 dollars, with a interruption of the longest hike streak (eight meetings in a row) of the last five years. The turnaround must be linked to various factors: the strength of the dollar, the growth of exports from some Opec countries and the high level of US shale oil activity, now competitive even just below 50 dollars a barrel.
Furthermore, Russia has said it will oppose any proposal to increase the production cuts it decided at the time. Moscow does not want to change the current deal because any further reductions would send the wrong message to the market, according to Russian government officials.
The consequence was a sharp decline in the Energy sector (-2% the index) on Wall Street. Exxon and Chevron posted declines of more than 1,5%. In Piazza Affari Eni fell by 1,4%, Deutsche Bank cut its target price to 14 euros from 15,25 euros. Exane has reduced its target price from 14 to 12 euros, confirming the underperform recommendation.
Turns around after the recent increases Saipem (-2,7%). Barclays intervened on the stock, cutting the target price to 4,10 euro from 5,50 euro and the recommendation to Equal Weight (Neutral) from Overweight. Analysts downgraded the rating as they "do not expect a consistent earnings turnaround" in the near term.
ONLY MILAN DOWN. TODAY IN VIEW OF POSITIVE OPENING
Futures on European stock exchanges anticipate a moderate upturn. Spotlights also on the speech of the chief economist of the ECB Peter Praet today in Paris. Only Milan is down. The Ftse Mib index lost 0,44% to 20.939 points. Similar trend in Madrid -0,41%. London advanced 0,14%, Frankfurt gained 0,13% and Paris 0,10%.
European stocks were buoyed by June's final Eurozone composite PMI, which came in at 56,3, down from 56,8 in May but above the preliminary and consensus, both at 55,7. ,XNUMX points.
OPTIMISTIC PADOAN. PROMETEIA RAISES GROWTH ESTIMATIONS TO 1,2%
Italy will grow by 1,2% in 2017, the year in which growth will be the highest since 2010. This is what emerges from the July forecast report of the Prometeia study center in which the institute revised upwards the estimates of March, bringing them to +1,2% from +0,9%.
Treasury Minister Pier Carlo Padoan is optimistic. “In the quarters ahead of us, I am convinced that the effects of those policy measures that are beginning to change the behavior of companies will begin to be felt,” the minister told the ANIA assembly.
GOVERNMENT BONDS: MAXIASTA FOR FRANCE AND SPAIN
The volatility seen in the eurozone bond and forex bond markets last week is not significant and in part reflects the mismatch between equity and bond prices. This is the opinion of ECB council member Benoit Coeuré. adding that equity prices better reflect the economy's outlook than stubbornly low bond yields that are set to realign.
Sales on BTPs became more consistent in the final session. The Italian ten-year bond ended the session at 2,14%, confirming itself close to the recent highs since the beginning of June. The Btp/Bund spread widened to a maximum of 167 basis points. Today the market will be dominated by offerings of bonds from France and Spain for a combined figure of 13,5 billion, including indexed. Paris intends to allocate up to 8,5 billion Oats over 10 and 30 years. Madrid offers up to 4 billion titles between 5 and 29 years old as well as one billion indexed titles as of November 2030.
PAUSE FOR THE BANKS, BUT CARIGE AND FINECO FLY
The declines of the banks have slowed down Piazza Affari. After hitting a 16-month high, the Italian banking index closed down 0,96%, while the European banking basket gained 0,05%. Among the most affected by the sales are the protagonists of the recent increases: Bper Banca -2,4%, Banco Bpm -2,3%. Profits were also taken on Unicredit (-1,5%). Better Intesa (-0,2%) awaiting the green light from Parliament for the decree on Veneto banks.
Mediobanca -1,46%. The group's board of directors met yesterday to define the budget numbers for the 2017-18 financial year, which officially began on 1 July, based on the preliminary balance of the fiscal year that has just ended, the accounts of which are good and in line with expectations.
Carige still rallying (+5,5%) after +23% on Tuesday: the institution's stock continues its race in the wake of the latest news on capital strengthening and non-performing exposures.
Finecobank also went against the trend (+1,17%). Citigroup confirmed the buy recommendation on the stock and the target price at 8,2 euros. Analysts appreciate the news that the group has launched the project to set up a new investment company under Irish law dedicated to asset management activities, wholly owned by the institute.
Among the insurance companies, Generali (+0,5%) and UnipolSai (+0,4%) rose, while Unipol fell (-1,4%).
MPS, RETURN TO SEPTEMBER. THE NPL OF SIENA MAKE CERVED FLY
The new Monte dei Paschi will return to Piazza Affari in the second half of September, after being recapitalised by the Treasury for 5,4 billion at the turn of the summer. The return to the listing will be preceded by a road show to illustrate the contents of the restructuring plan to the financial community. The free float will settle at 30%. The plan illustrated by CEO Marco Morelli envisages a net profit of more than 1,2 billion by 2021. Particular attention will be paid to cost containment: 5.500 redundancies are expected, of which 4.800 exits through the activation of the solidarity fund. On the resignation front, however, Monte will close its offices in France and Belgium. Among the large shareholders, Morelli underlined, there will be "an important presence" of Generali, which owns 400 million of the institute's subordinated bonds. Meanwhile Axa, the bank's historic insurance partner, underlined its support for management: "We welcome this milestone", reads a note from Paris.
The fallout of Cerved (+3,65%) also figures among the repercussions of the recovery of Mps. The stock soared after the announcement of the signing with Quaestio Holding of an exclusivity deal for the negotiation of an agreement which provides for the joint acquisition of the servicing platform (Juliet) of Banca Monte dei Paschi di Siena, which Quaestio will treat exclusively in as the lead investor in the securitization of the institution's 26,4 billion non-performing loans.
PROMOTED YNAP AND MONCLER. JP MORGAN PUSHES LEONARDO
Positive effect of Jefferies hedging on some companies in the luxury sector. Moncler advances (+1,12%) rewarded by the buy (target 24 euros). Ynap's response (+4,49%) was even more energetic: the broker assigned a target price of 33 euros.
Leonardo shines among the industrialists (+1,91%) helped by the improvement in the target price by JP Morgan to 20 euros from 17, with an overweight rating. In a note on the European defense sector, the experts revised the EPS estimates and the target prices on the securities after the Paris Air Show.
Prysmian (+1,81%) benefited from Goldman Sachs' target increase from €30 to €31 (the stock remains on the Conviction List Buy). Analysts have improved EBIT estimates to take into account a more favorable outlook in the telecom sector. Fiat Chrysler drops by 1,5%.
AGREEMENT PUSHES RCS. TOP DIGITAL BROS
Rcs increases by 1,73% after the agreement with Intesa for the total refinancing of the bank debt of the publishing group for a total of 332 million euros (expiring on 31 December 2022). Banca Akros promoted the share to "accumulated".
Fincantieri (+3,91%) and Maire Tecnimont (+3,56%) also rose sharply. Barclays raised its target price on the stock from 3,8 to 5,1 euros, confirming the overweight recommendation.
Digital Bros also stands out (+6,94%), best title of the day. Banca Akros upgraded its rating on the stock from neutral to accumulated. The target price remains unchanged at 14,5 euros. Akros analysts have changed their opinion after the "recent stock correction".
