The first effects of the trade war are being felt. The Wall Street Journal notes that, thanks to the tariffs on aluminum and steel, the price lists of washing machines in the USA have risen by 17% in the last quarter. Even more disturbing, China has reduced its stock of US Treasury securities by tens of billions since April. Not much (there are 1.100 billion t-bonds on hand), but enough to scare the holder of the Treasury, Steven Mnuchin. But not President Donald Trump who threatens to turn up up to a total of 450 billion the duties on made in China. Peter Navarro, the trade war ideologue, reiterates that "the US will win". Beijing growls against "blackmail", prepares a painful response (main target the oil industry) but, to cushion the impact on companies, the central bank announces a cut in compulsory reserves.
This explains the contrasting performance of the stock markets: weak Wall Street (like the European Stock Exchanges), in a timid recovery this morning in Asia. But the predictions turn ugly.
Rebound trials in Asia. Some turned positive during the night, others moved away from the lows reached at the start of the session.
Tokyo's Nikkei index climbs 0,3%. Hong Kong gains 0,3%, Seoul 0,9% and Mumbai 0,3%. The CSI 300 index of the Shanghai and Shenzhen stocks is down again (-0,6%) after Tuesday's crash. In Shanghai, the shareholder protection network of the 30 companies in the blue-chip index was triggered.
Closing down on Wall Street, but above the day's lows. The Dow Jones index (-1,15%) erased the gains of 2018. S&P 500 -0,40%, down also the Nasdaq (-0,28%). The Russell 2000 holds (+0,1%), the list of small businesses, less affected by import/import problems and by the increase in the dollar against the yen (110,1) and the euro (1,157).
Leads the declines Boeing (-3,8%), the title most linked to exports with China together with Caterpillar (-3,6%).
A historic exit from the Dow Jones is looming: General Electric (-1,9%), present since 1907, will leave the blue chip list from June 26th. The place of the conglomerate, one of the symbols of capitalism of the last century, will be taken by Walgreen Boots Alliance, the colossus of pharmacies controlled by Milanese Stefano Pessina.
Netflix's umpteenth record is also noteworthy: + 4% to 404 dollars.
Brent oil is down slightly to 75 dollars a barrel, closing yesterday at 1 dollars a barrel. Meanwhile, the energy ministers of the OPEC member countries are starting to arrive in Vienna: the assembly opens on Friday. The Iranian minister, intercepted by journalists at the airport, said that the meeting should not end with an agreement on production. Bijan Ndar Zanganeh controversially specified that the cartel of countries is an autonomous entity, not part of the United States Department of Energy. In Milan Eni falls (-75,3%). Tenaris -0,1%.
IN MILAN BANKS SHIELD DOWNWARDS
Piazza Affari holds thanks to the banks. The bond shield has protected the Italian price list from the winds of war on trade that have sunk the Asian markets and caused the decline of the other European price lists, with the exception of Madrid. The euro loses ground, steadily below 1,16 against the dollar after the new reassurances on rates from dovish Mario Draghi.
MERKEL-MACRON: AGREEMENT ON THE EUROPEAN MONETARY FUND
Also noteworthy is the Merkel-Macron agreement on the increase in the EU budget to be proposed at the next European summit together with the transformation of the European Stability Mechanism into a European Monetary Fund capable of intervening in banking crises (the Deutsche Bank crisis undoubtedly favored the conversion of the German falcons).
Milan (-0,07%) closes just below parity at the end of a long run-up from -1,6% at the start of the day. Thanks to the backlash of the banking sector, the Ftse Mib index even climbed back into positive territory before a slight correction, in any case above the 22 mark (22.084).
The price lists of "core" Europe are under fire. Worst of all was Frankfurt -1,18% ahead of Paris -1,10% on the day of the meeting between Angela Merkel and Emmanuel Macron. The drop in London was more modest (-0,39%). Madrid -0,1%.
SWISS SOS: ITALIAN UNCERTAINTY STRENGTHENS THE FRANC TOO MUCH
Down Zurich (-0,75%), held back by the strength of the franc above 1,15 against the euro: the appreciation of about 5% was largely driven by investors looking for a safe currency. The Swiss government, presenting its latest economic forecasts, warned of the strengthening of political uncertainty in Italy, with potentially worrying consequences for the franc.
LEGA-M5S: MORE FLEXIBILITY FOR THE BEL PAESE'S ACCOUNTS
More flexible budgetary rules and more space for productive spending but straight bar on debt because "it is good not to jeopardize the downward path of the debt/GDP ratio: budget consolidation is one of the necessary conditions to maintain and strengthen the confidence of markets". Thus the Minister of Economy, Giovanni Tria.
In the resolution to the Def presented by the majority parties, the government undertakes "to take all initiatives to favor the deactivation of the safeguard clauses inherent to the increase in the VAT rate and excise duties on petrol and diesel" and "to identify measures to be taken in 2018 in compliance with the budget balances”. But the parliamentary document reiterates the request for flexibility from Europe with the aim of asking for the postponement of the balanced budget by one year, from 2020 to 2021, remodulating the deficit in "compliance with European constraints".
The indications coming from Parliament did not please the debt market.
During the session, the spread rose to a maximum of 226 points, to then close at 218 (+2 compared to the previous day). Similarly, the ten-year rate closed at 2,55%, on the levels of the previous closing (2,56%), after a maximum during the day of 2,61% and a minimum of 2,54%.
DRAGHI REITERATES: WE WILL BE PATIENT ABOUT RATES
The European Central Bank will raise interest rates "patiently" and "gradually" as inflation in the eurozone recovers, President Mario Draghi said yesterday speaking in Sintra at the meeting of central bankers. “We will remain patient in timing the first rate hike and use a staged approach to adjust policy thereafter.”
The recent high volatility seen in short-term Italian government bonds is due in part to technical factors as well as political fears. This was said by Davide Iacovoni, head of the public debt.
PIMCO: THE 2011 CRISIS WILL NOT BE REPEAT ON BTPs
The rates of Italian bonds could rise further but not equaling the situation seen with the debt crisis of 2011. This was supported by Scott Mather, one of the CIOs of Pimco, the first bond investor in the world. “Italian bond rates have already risen, causing a widening of more than 100 basis points – he said – Could they rise more? Yes, we think this could be the trend but not like in 2011”.
EXODUS, HOW BPM COMES OUT OF SUFFERING
It was Banco Bpm's great day (+5,6%), supported by the sale of the non-performing loans that have weighed on the bank since the wedding between Bpm and Pop. Verona.
The bank was able to announce the Exodus operation, ie the sale of non-performing loans for 9,5 billion for a total price equal to 34,3% of the nominal price. Several buyers: Dobank, Cerberus, Prelios, Guber and a consortium headed by Christofferson Robb. Net non-performing loans thus fall to 3,2% of loans (against 7,1% at the time of the merger). Furthermore, the bank has put up for sale a final tranche of 3,5 billion euro of non-performing debt in addition to the platform set up by the institute. The operation would bring the total of non-performing loans sold to the target of 13 billion, two years in advance.
ECB PREPARES COMPROMISE ON NPLs
Exodus (that is, the landing on the debt-free promised land) coincided with the news that the supervisory authorities of the European Central Bank are considering a compromise on non-performing loans. In particular, plans are being made to give banks a certain number of years to deal with non-performing loans, as envisaged in the original proposal, but with the introduction of exceptions, for example for countries with a slow judicial system, which makes the recovery of the complicated collateral, as in the case of Italy. Despite the sharp reduction recorded in the last two years, eurozone banks still have €721 billion of non-performing loans, most of the stock is concentrated in Italy, Greece and Portugal.
The effect on the basket of the sector was immediate, which ended trading with an increase of 0,97%. Unicredit (+0,77%) slightly better than Intesa (+0,49%). Tonics Bper Banca (+3,39%) and Ubi Banca (+3,07%).
Dobank down (-1,09%) on the day of the presentation of the business plan.
Among the insurance companies, Generali gained 0,38% to 14,585 euros after Banca IMI confirmed the add recommendation on the stock, with the target price going from 18,3 to 16,8 euros, still above current market prices.
DUTIES WEIGHT ON CARS AND TECH: STM -4,2%
The tariff clash between Washington and Beijing weighed on industrialists, in particular on the automotive and technology sectors: Stm lost 4,24%, Cnh Industrial -3,12%, Prysmian -1,33%,
Fiat Chrysler (-1,43%), Ferrari (-1,57%) and Brembo (-1,06%) also slowed.
FERRAGAMO PLACES 3,5% OF THE CAPITAL
Luxury is also in trouble: Moncler -3,09%, Salvatore Ferragamo -1,45%. The leading financial company Finanziaria, majority shareholder of the Florentine fashion house, announced the sale of 5,9 million shares, equal to approximately 3,5% of the capital, to institutional investors through an Accelerated Book Building. Ferragamo Finanziaria holds 57,8% of Ferragamo.
Utilities and defenses held up: A2A +2,35%, Snam +2,09%, Terna +1,78%, Italgas +0,58%. Credit Suisse cut its target price to 5,10 euros. Enel -0,06%.
RECORDATI, IN VIEW OF THE SALE TO CVC
In great evidence Autogrill (+4,1%) which rises in the wake of press reports according to which the group could consider the IPO of the American subsidiary HMS Host.
Positive reaction from Recordati to the rumors about the acquisition of a stake by CVC: +2,66%. It would be in an advanced stage of a discussion with the company to raise a controlling stake of over 3 billion euros.
