MOODY'S PUNISHES THE BIG BANKS. BUT THE ECB WILL SNOB THE EURO RATINGS UNDER FIRE. PIAZZA AFFARI BELIEVES IN EUROPEAN AID
The markets will now have to face a new negative unknown: the Big Bank effect. The Moody's agency has in fact downgraded the ratings of 15 world-class banking groups, too exposed to the bad weather in crisis areas: 9 European institutions were targeted: Deutsche Bank, Crédit Agricole, Socgen, Bnp Paripas (Bnl included), HSBC, Barclays, Rbsm Crédit Suisse and Ubs. To these must be added the American Bank of America, Citigroup, Jp Morgan, Goldman Sachs and Morgan Stanley. Following the announcement, the euro dropped to a five-month low against the dollar, slipping 1,3% to $1,2540.
This morning in Tokyo the currency is trading at 1,2556. Asian stocks closed the week down on the back of negative news from Wall Street and the Chinese economy: Tokyo -0,14%, Hog Kong -1,03%. The US Stock Exchange had closed a few hours earlier the worst session of 2012. The S&P 500 index showed a drop of 2,23%, the Dow Jones fell by 1,96%. The Nasdaq does not escape the decline: -2,44%. The analysis by Goldman Sachs contributes to the negative trend, which forecasts new declines for the S&P. The sharp drop in commodity-linked securities weighed on the list, retreating due to fears of the global crisis.
Oil continued its decline: WTI is traded at 79,6 dollars a barrel (-2,2%), on its lowest level for 12 months, and Brent fell to 90,8 dollars (-2%), its lowest since 18 months. The data from Beijing also weighed on the trend of crude oil: the PMI index of HSBC provided a preliminary figure for June of 48,1 for the Chinese manufacturing sector. This is the eighth consecutive month below 50, a sign of an economic slowdown.
No less important, of course, is the European chapter of the crisis. Today Mario Monti will receive Angela Merkel, François Hollade and Mariano Rajoy in Rome. Objective: to develop a series of concrete measures (therefore within the framework of the treaties already in force) to be approved at the summit of 28-29 June. Meanwhile, the ECB is preparing ammunition to face an even more tense situation than last winter.
The central bank has not spared the rating agencies: from now on, the ECB will select the securities to accept as guarantee for its loans on the basis of judgments made within the institution. Enough, therefore, with the ratings of Moody's, Standard & Poor's and Fitch. A novelty that protects Madrid from the consequences of a possible relegation to the level of junk bonds, also because the ECB is willing to accept as collateral, in addition to government bonds, private bonds and ABS, or securitized mortgages that abound in the balance sheet of Spanish banks.
Meanwhile, the consulting firms Oliver Wyman and Roland Berger have delivered the work on capital needs of Iberian institutions: the 14 Spanish banks with operations on the national territory have a capital requirement of between 51 and 62 billion in a situation of 'stress' market and taking into account all lending segments. A significantly lower figure than the 100 billion euro of maximum support made available by Europe for the Iberian banking system.
Finally, on the eve of the Rome summit, Christine Lagarde, general manager of the International Monetary Fund, challenges Angela Merkel: in order to save, it is essential and urgent, she says, that the ECB resume buying the bonds of the countries targeted by speculation and that the intervenes directly in the capital of banks at risk. Lagarde believes that "the introduction of a limited form of common debt can be an intermediate step towards fiscal integration and risk sharing".
According to the IMF, these debt securities could initially be limited. In short, something is moving on the sovereign debt front. Piazza Affari, the only Stock Exchange with a positive sign, immediately capitalized on the rumors about forthcoming support for Italy and Spain. The FtseMib index closed slightly higher (+0,1%), unlike Madrid (-0,2%). Concern over the slowdown of the economy in the USA and China dominated the other stock exchanges: London fell by 0,7%, Paris -0,3%, Frankfurt -0,7%.
Strong appreciation of the dollar: the euro traded at 1,256 in the evening, from 1,270 at yesterday's close. At the end of the day, the 5,71-year BTP recorded a yield of XNUMX%, almost unchanged compared to yesterday, but the spread worsened going back up to 419 (+6 basis points), due to the new rise in the Bund, whose yield fell to 1,52% from 1,60% yesterday.
The Spanish Treasury sold 2,2 billion of government bonds with an amount exceeding the 2 billion envisaged for the operation, but had to accept a very sharp rise in yields. On the European stock exchanges, the declines concerned the shares of mining companies (Stoxx in the sector -2,9%), oil (-1,7%) and the automotive industry (-1%), held back by disappointing data on the growth of the Chinese economy and the failure to adopt new economic stimulus measures in the USA.
In Milan, on the contrary, the banks woke up in the afternoon. MontePaschi closed up 3%, Unicredit +1,9%, Mediobanca +2,3%, Popolare dell'Emilia +0,4%. Positive Generali up 0,4%. New twist in the negotiations for the insurance hub. Consob has decided to dispute some items recorded in the financial statements of Fonsai and Milano Assicurazioni relating to claims reserves. These are findings relating to past years, which must be reported in the prospectus for the capital increase. The risk is that it won't be done in time by July. However, the shares of the companies involved are up: Fondiaria-Sai +3%, Premafin +3,9%. Unipol rose by 3,3%: today the Bolognese company will announce in a conference call the definitive terms of the merger operation with FonSai, Premafin and Milano Assicurazioni. Mediolanum rose by 4,5%. On the contrary, Mediaset fell sharply -2,4%, after Goldman Sachs lowered the target price to 1 euro, confirming the "sell" recommendation.
