Yesterday evening, after closed exchanges, the ECB issued a note announcing "measures to mitigate the effects of possible downgrades on the availability of collateral". Bonds that have recently fallen below the threshold will also be accepted as a pledge until 21 September Investment gradeafter adjusting their value. In short, the rejection of Italy's rating by S&P, the agency that will deliver its verdict tomorrow evening, would not lead to the automatic exclusion of BTPs from Frankfurt purchases. Good news which, however, suggests that the premises of this afternoon's European Council are disappointing.
Meanwhile, the markets, brought to their knees by the pandemic, rely on the diplomacy of the gunboats. Oil is recovering thanks to Donald Trump's threats to Iran, which yesterday sent its first satellite into orbit, demonstrating a disturbing ballistic capacity. Missouri has sued none other than China for keeping quiet about the coronavirus outbreak. Great is the mess under the sky, as Chairman Mao used to say. But, contrary to what the Great Helmsman claimed, the situation for the market is not excellent at all.
Asian Stock Exchanges mark a moderate rise towards the end of the session. The Dow Jones Asia Pacific index is at parity. Hong Kong's Hang Seng is up by 0,2%, also due to the new intervention by the monetary authorities in support of the local currency. The Shanghai Composite is down slightly.
Seoul's Kospi rose by 0,5% on the day South Korea's GDP data was published: in the first quarter, only partially affected by the pandemic, the sequential decline was 1,4%, the worst result since 2008 .
The effect of the new measures to support the economy approved yesterday in the USA, amounting to around 500 billion dollars, contributed to supporting the stock exchanges in the East. Last night on Wall Street the S&P500 gained 2,2%, to 2.800 points; Dow Jones +1,99%, Nasdaq +2,81%.
Netflix has lost ground (-2,9%): the market is not impressed by the new boom in subscriptions (15,5 million) linked to the closure imposed by the pandemic.
Operators are paying more attention to the consequences on the US world of work: today the new figures on unemployment benefits will be communicated. Since mid-March, new requests have reached 22 million. Based on this information, Bloomberg economists calculate that more than 8% of the US labor force is receiving benefits, up from 5% last week. Unemployment could exceed 15% in April.
Brent oil is settling down: this morning it rose by 5%, to 21,9 dollars a barrel, from +5% yesterday. Wti crude oil is also on the rise to 14,22, +3,3%.
Opinions of experts are divided. Pierre Andurant, who has made fabulous gains betting on the downside, believes that new violent falls can be repeated as long as the pandemic lasts. JP Morgan strategist John Normand believes the crash two days ago has no systemic implications, as it was not accompanied by similar moves in other commodities. The expert says he is cautious about oil prices in the short term, but he believes that this summer's prices will be higher than now.
TODAY IS EUROGROUP D DAY. RACE TO THE SPANISH BONUS
European markets also trimmed the week's losses ahead of Eurozone D-day. The anomalous performance of the debt market, among other things, underlined the climate of uncertainty. The day was characterized by demand for government bonds from the European periphery: the Treasury announced that foreign investors had taken up the bulk of the 16 billion euro dual tranche syndicate launched yesterday and which saw demand exceeding 110 billions, coming almost entirely from international buyers, which absorbed 76% of the 5-year period and 81% of the reopening of the thirty-year period. Fireworks also for the placement of a ten-year anniversary by Spain. The new security, offered through a pool of banks, received reservations for 97 billion euros in a few hours, a record for this type of transaction.
Milan appreciates by 1,91% to 16.765 points. Frankfurt closed with a gain of 1,66%; Paris +1,25%; Madrid +1,33%; London +2,31%.
THE RECOVERY FUND ADVANCES (2.000 BILLION), BUT ONLY SINCE JUNE
Today is a crucial day for the choices of the Eurogroup. Nobody, Germany and Italy in the lead, can afford a failure, but the distances remain almost unbridgeable. The squaring of the circle will pass from the development of a Recovery Fund of at least a trillion. According to Bloomberg, the project to support the Community economy could reach 2.000 billion euros. The initial resources should be 620 billion euros, just over half coming from an allocation from the European Union budget, while another 300 billion should be raised on the capital market with some form of community guarantee. But in reality the details of the plan, where the devil will certainly be hiding, are largely all to be defined, in view of a new summit in June.
It is obvious that Italy will give up on the more combative resolutions, see the threat of the veto on theuse of the Mes. The government will thus be able to have 36 billion euros (against 14 already paid) for health care costs and access the OMT-based umbrella in the future: access to the Mes is necessary to safeguard the Eurotower, a condition which Italy cannot do without.
RATING AT RISK, ECB READY TO INTERVENE
Standard & Poor's will express its opinion on Italy's creditworthiness on Friday, starting from a negative outlook and just two degrees above the acceptable threshold (Investment Grade). The European Central Bank is already considering the possibility of a downgrade and is evaluating countermeasures: according to reports from Bloomberg, there has already been a conference to talk about the possibility of accepting as collateral, against funding, even junk bonds, those under the Investment Grade.
THE SPREAD BEYOND 274, THEN BRAKES
A rebound in closing for the Italian paper after a nervous session that saw spreads and rates soar in anticipation of tomorrow's European Council.
The Btp/Bund yield differential on the ten-year stretch is at 253 basis points, down from 266 yesterday, after a flare up to 274, the highest since March 19th.
The ten-year rate stood at around 2,10%, after closing at 2,17% the previous session. The yield rose during the session to 2,28%.
The Bund moved to -0,41%, +5 basis points. The spread narrows to 248 basis points from 265 this morning. The differential with Spain decreases, the ten-year bond weakens to 1,21%, +12 basis points.
The three-month Euribor rate rose to its highest level since the beginning of 2016, to levels not seen since 2016, to -0,19%, from -0,23% yesterday. The movement reflects the increase in financing costs of the peripheral countries of the euro area.
The Treasury will offer 3,75 billion in Ctz and Btpei on Friday
HI TECH WAKES UP: STM BOOM, PRYSMIAN VOLANO AND DIASORIN
Stm leads the race in Milan after the accounts for the quarter: $2,23 billion in revenues and a gross margin of 37,9%. Second quarter forecast: $2 billion in sales, versus a margin of 32,6% to 38,6%. Investments for 2020 fall between 1 and 1,2 billion dollars, from 1,5 billion.
The Italian-French jv excels in a day of increases for the European tech sector: the German Infineon rose by 4% after the president reassured the liquidity available; there is enough to go on until the end of the crisis caused by the pandemic. Sweden's Ericsson is also up, after the presentation of the quarter's data. Prysmian (+4,03%) celebrates the marketing of the first cable available in the world with a 180 micrometre fiber.
Still on the shields Diasorin (+8,1%).
Oil stocks also rebounded in Milan: Eni +4,87%, Saipem +5,75% on the eve of the accounts, Tenaris +3,1%.
BOUNCE THE MANAGED, LEAD THE RACE FINECO
Asset management is clearly highlighted. Fineco Bank rises by 6%: the stock was promoted to buy by Equita Sim, with a target price raised by 10% to 11 euros per share. Buy also confirmed by Kepler Cheuvreux, who raised the target price from 9,7 to 10,5 euros. Banca Mediolanum +3,66%.
Fight the banks. Always in the spotlight Ubi (+3,21%). The Bigs are doing well: Unicredit +1,94%, Intesa Sanpaolo +1,38%, promoted to buy from neutral by Redburn. On the other hand, Mediobanca is down (-1,31%).
Fiat Chrysler (+1,8%) announced that it had drawn on a 6,25 billion euro credit line. The group intends to resume production of the Ducato at the Sevel plant starting from Monday 27 April. The unions communicated it, explaining that for the reopening the group will follow the path of the prefectural authorization, informing the Government and motivating with the strategic nature of Sevel.
LUXURY IN BRAKING, CHINA DISAPPOINTS GUCCI
Also noteworthy is Moncler (-2%): Mediobanca Securities reaffirmed the neutral recommendation and the target price of 33 euros. Ferragamo was also down (-3,86%), in the wake of the French luxury giant Kering, down 5% after the quarter's communications: Gucci's revenues, hit by the stop in sales in China, fell more than expected .
The utilities were brilliant: Italgas +5,13%, Hera +2,85%, Snam +2,37%. Sogefi resists in positive territory (+0,77%), on which Banca Akros has reduced the recommendation from accumulated to neutral, with a target falling from 1,75 to 1,25 euros, after the accounts for the first quarter of 2020.
