A sign of comfort comes from China in the midst of so many disasters. Beijing's industrial production rose 3,9% in April compared to 12 months ago, the first figure with the plus sign since the outbreak of the epidemic. The figure, better than expected, gives hope for growth in gross domestic product in the second quarter.
CHINA TOWARDS CONGRESS, INDIA ASSISTS SMEs
The Tokyo Stock Exchange is up by 0,4% in the final session, that of Hong Kong by 0,4%, that of Sydney by 0,9%. On parity the Kospi of Seoul.
Chinese stock markets moved little on the eve of the People's Congress of China, already postponed due to the pandemic, which should approve the economic policy guidelines, including any new measures to support the financial and production system.
India's stock market opened slightly lower after -2,7% yesterday. Faced with the reluctance of banks to provide loans to the corporate system, the government has taken the decision to make 62 billion dollars available to small and medium-sized enterprises and microfinance.
US UNEMPLOYMENT RISES TO 36 MILLION
The good news for the global economy ends there. The recovery of Chinese factories, favored by state aid, did not exceed the entry threshold of department stores: retail sales fell by 7,5% against the increase in unemployment which rose to 6%. Nothing particular from the biblical numbers coming from the USA: unemployment benefits in the States rose by 2,98 million units in the week ended May 9, bringing the total number of American jobless to about 36 million units since the beginning of the Coronavirus emergency. And in the eurozone, reports the ECB's economic bulletin, GDP in 2020 will contract between 5 and 12%. Against this backdrop, Donald Trump has chosen the strategy that suits him best: attack. Yesterday in an incendiary interview with Fox News, the president threatened to cut off all contact with China, which has "deeply disappointed" him. “What will be the consequences? We could save $500 billion." It is not known how, but the US Treasury has already banned investments already planned by large public pension funds in Chinese companies.
THE VIROLOGIST: AMERICA TOWARDS THE DARKEST WINTER
And the trade war risks rekindling in a context of bitter conflicts over anti-Covid-19 strategies. Before Congress Rick Bright, the former director of the Advanced Research Authority who was fired last month by the White House, said the United States was heading for "the darkest winter in modern history" if it doesn't quickly improve coronavirus response. Meanwhile Emmanuel Macron has asked that any vaccine against Covid-19 be subtracted from market laws and has summoned the executives of the French multinational Sanofi. The CEO of the pharmaceutical group had said he would first share the vaccine with the United States.
KBW: US BANKS CAN PAY THE DIVIDEND
After an agitated start, the US markets are on positive ground. Last night the S&P500 gained 1,1% to 2.850 points, Dow Jones +1,6%, Nasdaq +0,9%.
The banks were pushing upwards: Bank of America +4%, JP Morgan +3,5%, Wells Fargo +6,7% and Capital One +9%. The rally started after the publication of a report by Keefe, Bruyette & Woods, which argued that US banks should have no problem paying the dividend.
In great evidence Cisco Systems (+4,5%), favored by the boom in connections required by home working.
Brent oil is up 1% to 31,5 dollars a barrel, from +6,7% at yesterday's close.
PIAZZA AFFARI LIMITS DAMAGES TO -1,84%
Very difficult day yesterday for all the European Stock Exchanges. Piazza Affari was no exception, - 1,84% at 16.602 basis points, but rising from the lows of the day which exceeded -3%. A new Council of Ministers and a summit with the Regions are scheduled today to establish the indispensable guidelines for the reopenings of 18 May. The possibility of moving from one Region to another should not yet be foreseen. However, the text will contain the possibility of reopening on a territorial basis as long as the commercial and economic activities guarantee the requirements indicated by Inail.
100 BILLION LOWER REVENUE FOR GERMAN TAX
Deep red also in the rest of the Old Continent: Frankfurt loses 1,99%. Finance Minister Olav Scholz said yesterday that the slowdown in the economy will result in 100 billion euros in lower tax revenues. But there will be no tax increases, Angela Merkel assures: with rates below zero, even in Berlin it is better to go into debt.
Little better Paris (-1,65%). Loses Bouygues, -4,6% after the accounts. Government measures to support tourism have not awakened Accor (-2,7%). Creepy numbers for the City: the Stock Exchange drops 2,75%.
STOCK STOCKS SHINE
In the midst of so many disasters, the shares of the Stock Exchanges shine, favored by the boom in trading driven by growing volatility. Euronext gained 3,4% after reporting a 55% jump in quarterly revenue, driven in part by intense March trading that boosted profits at some banks and brokerages.
VILLEROY: WE WILL NOT TOLERATE UNMOTIVATED RATE RISES
The deterioration of consumption indicators is unprecedented”. Therefore "a large degree of monetary accommodation is still needed". After Jerome Powell's harsh words, it fell to the Bulletin of the ECB to renew the alarm on the state of the economy which threatens to escape from the control of the central banks. The contraction of GDP in the euro area, between 5 and 12% "will be limited by the gradual removal of the containment measures, but the speed and extent remain highly uncertain". For this reason, the board of directors is "absolutely prepared to increase the extent of Pepp's purchases". But also to be vigilant against possible attacks on weaker partners.
"But we will not allow adverse market dynamics to lead to unjustified rises in interest rates in some countries, which would threaten the smooth transmission of our common monetary policy", warned the governor of the Banque de France Villeroy de Galhau yesterday via video conference with Bocconi.
SPREAD AT 235, LITTLE CHANGED
Against this backdrop, Eurozone bond markets are relatively more stable than equities. After a substantially stable morning, there was a drop in prices and a parallel rise in yields.
The spread widens slightly to 235 basis points. The yield of the BTP closed at 1,820%.
Pending the launch of the new Btp Italia next Monday, the Treasury continues to enjoy the favor of professional investors. Yesterday the reopening to specialists of the Btp offer for 900 million raised bookings for 8 billion.
LANDSLIDE AGAIN EXOR, FCA WAIVED DIVIDEND
It was another bad day for the Agnelli team. After Wednesday's crash, Exor dropped another 5% in the wake of the announcement that the French Covéa withdrew from the purchase of Partner RE, an operation worth 9 billion dollars. “The uncertainty linked to the epidemic – he writes Les Echos – is also starting to circulate regarding the marriage between FCA and PSA”. The hypothesis is vigorously rejected by the two groups but both Fiat Chrysler (-4%) and Peugeot (-6,7%) have announced that they have canceled the distribution of their respective ordinary dividends, each of 1,1 billion euros, in light of the impact of the Covid-19 emergency. The difficulties of the Iveco spin-off are still holding back Cnh Industrial (-5,64%).
DIASORIN CONTINUES THE RALLY
The most positive note comes from again Diasorin: +4,3% on top of yesterday's +7% after reaching a new all-time high of 180,8 euros. The diagnostics company released slightly better-than-expected first-quarter results, withdrew its 2020 guidance, but increased production capacity for serological tests from 5 to 10 million a month, also obtaining the green light for the sale of these tests in Canada. Banca Akros has raised the target price from 119,2 to 192,5 euros, reaffirming the accumulated rating, after the results of the first quarter of 2020.
NIGERIA SUPPORTS SAIPEM
Holds Saipem (-1%) thanks to the new contracts for the Nigeria LNG Train 7 project, a total value of over 4 billion dollars. Saipem's share is equal to 2,7 billion. Down Tenaris (-3,6%) and Eni (-2,4%), regardless of the leap in the price of Brent.
The good news basically ends there.
BANKS AND UTILITIES DOWN, LEONARDO WAKES
The banks are under fire, starting with Mediobanca (-2,8%) and Unicredit (-1,81%). Intesa Sanpaolo -0,72%.
The utilities are not saved: Hera -3,36, Snam -3,14%, Enel -2,42%.
Leonardo fell sharply, dropping 6,5% much worse than the index, penalized by Morgan Stanley's decision to cut the target price to 6,4 euros from the previous 6,75 euros,
Down the other industrial blue chips: Prysmian -2,52%, Stm -2,24% and Buzzi -1,77%. The exception is Pirelli (-0,55%): Deutsche Bank confirmed the hold recommendation and the target price of 4 euros after first quarter results higher than analysts' expectations and the confirmation of the 2020 targets.
Among the mid caps, Tod's, well bought for most of the session, reversed course and dropped 1,4%: the Italian luxury group closed the first quarter with sales down by almost 30%.
FALCK AND INTERPUMP CONTREND
Interpump +2,1%. Kepler Cheuvreux raised the target price from 27,5 to 29,5 euros, confirming the buy recommendation, after the quarterly accounts.
Of note is Falck Renewables (+3,06%). Equita Sim has raised the rating on the stock to buy, with a target price increased by 23% to 5,3 euro, after results above expectations.
Editorials fell sharply: Mondadori -6,32% and RCS -4,6%.
