“We are living in a Yellen submarine,” one trader commented after the Fed chairman's words on Friday. Not without reason because, although the US Stock Exchanges will remain closed today for Memorial Day, the performance of the price lists will certainly be conditioned by the message on rates from Miss Yellen.
Confirmation arrived right from the start: the dollar rose against all Asian currencies, starting with the yen, traded below 111 against the US currency, the lowest value for a month. The yuan was also down, trading at 6,5814. At the official fixing, the Chinese currency's exchange rate was lowered by 0,4%.
The advance of the US currency was also felt on the raw materials front: oil slipped below 50 (Brent at 49,23 dollars a barrel). Gold is also down, slipping below 1.200 dollars an ounce for the first time since February.
The Nikkei index rises on the Tokyo Stock Exchange (+1%), despite the drop in retail sales in April. But the market takes the postponement of the VAT increase for granted. Good Hong Kong (+0,7%). The Chinese markets are more contrasted: Shanghai +0,2%, Shenzhen -0,1%. “The recovery of the dollar – comments the Goldman Sachs economist Song Yu – can only favor the resumption of capital flight from China”. According to Daiwa Securities, Beijing's foreign exchange reserves will drop to 2.700 billion (against the current 3.300) within the year before slipping to 2.000 billion at the end of 2017.
Futures signal a positive opening also in the European lists, galvanized by the strength of the US currency: the euro opened trading at 1,11, the lowest for the month, on the wave of indications from the US Central Bank. But it will be a session with reduced ranks: it is a celebration not only in the USA but also in Great Britain, with effects on the City, which will also open its doors. "This time," said James Bullard of the St. Louis Fed last night, "the markets have been well prepared." Credit to Janet Yellen.
FED AND ECB: CENTRAL BANKS RETURN AS PROTAGONISTS
“Do you have anything to say to investors? If you don't want to or can't, don't answer. I can understand it." But Janet Yellen, interviewed on Friday evening at Harvard by Gregory Mankiw (former economic adviser to George W. Bush), did not hold back. “Let me put it bluntly: the Fed has long set itself the goal of prudently and gradually raising official rates. Well, a move in this direction in the coming months is likely to be appropriate." Thus the Fed president has lifted the last veil of uncertainty about the central bank's intentions: the increase will take place, at the meeting of 14-15 June or in July.
The latter hypothesis is easier to avoid that the move coincides with possible turbulence in the event of a victory of the anti-EU in the British referendum on Brexit on 23 June, an unknown factor greatly feared by the big ones, as can be seen from the final communiqué of the G7. For the occasion, Japan, albeit reluctantly, undertook not to pursue a policy of weakening the yen. Shinzo Abe was undoubtedly convinced by the prospect of a strengthening of the dollar thanks to the increase in interest rates.
The European Central Bank will take note of the new scenario proposed by the US monetary policy at its meeting on Thursday. But Mario Draghi is not expecting any change of course, waiting for Frankfurt's expansive policy to finally produce effects on inflation. The attention of the markets will be directed to the type of purchases: by now the ceiling of purchasable public securities has been exhausted (see Portugal and Ireland) and German and French paper is increasingly rare. Hence the expansion to corporate bonds with the perverse prospect of financing US corporations which are accelerating issues in euros (already risen to 240 billion).
OPEC SUMMIT, US EMPLOYMENT, THE BANK OF ITALY'S FINAL CONSIDERATIONS
The OPEC summit will be held in Vienna on Thursday. It will be an opportunity to take stock of the current level of production in the countries of the cartel but no agreement is foreseen to freeze the activity. The target was shelved after the increase in oil prices, which exceeded $50 a barrel during the week.
As usual, the US macro calendar was full. The most important data, released on Friday, concerns the trend of the labor market: the forecast is 160 new jobs, but the recent Verizon lockout may have caused the cut, albeit temporary, of 35 jobs. Also noteworthy are the Case Shiller index on the performance of the real estate market and the data on sales, both released on Wednesday.
This morning the consumer confidence index for the Eurozone and the producer price index for Italy will be released. Markit is due to release manufacturing PMI data for the major eurozone economies and Japan on Wednesday.
The most important appointment in Italy concerns the "Final considerations" of the governor of the Bank of Italy, Ignazio Visco, scheduled for Wednesday 31 May, on the eve of the ECB summit.
TODAY THE AUCTION OF MEDIUM-LONG-TERM SECURITIES. NEW REDUCTIONS IN SIGHT
The offer of medium and long-term securities between 6 and 7,5 billion euros is scheduled for this morning in Piazza Affari. The yields of 5 and 10-year BTPs are expected to drop slightly compared to last April's auction: the five-year bond is expected to be around 0,42%, down compared to the 0,49% of the April auction while the yield on the 10-year BTP should settle in the 1,43% area, down on the 1,51% of last month's placement. Last Friday the six-month Bot has reached a new negative record to -0,226%. The yield of the 10-year BTP fell to 1,35% from 1,47% the previous Friday.
TERNA SHAREHOLDERS' MEETING, FERRARI PAYS THE DIVIDEND
Today, Astm (0,25 euro), Nice (0,0703 euro) and Tamburi (0,061 euro) are detaching the dividend. This morning the Ferrari dividend (0,46 euros), detached on 23 May, is being paid. Also today are the meetings to approve the financial statements of Terna and Pierrel.
CARIGE AND VENETO BANCA AT THE LAST CALL
Crucial day for two high-risk banking institutions: Carige and Veneto Banca. The board of directors of the Genoese bank meets today to approve the guidelines of the new industrial plan which will be submitted tomorrow for examination by the ECB, which has accepted the postponement of delivery of the final plan to 30 June next. The crux is suffering. The institute rejected the offer from the Apollo fund which envisaged the purchase of 3,5 billion in non-performing loans (for 695 million), in addition to an increase of 500 million reserved for the US investor. How will the counter-offer developed by the current majority be articulated? A capital operation seems excluded, the focus will be on cost cutting. Will it be enough to satisfy Brussels?
The Veneto Banca dossier is even more urgent. Yesterday the investor committee of the Atlante fund was held, in view of an intervention similar to the one adopted for the Popolare di Vicenza. The Board of Directors of Veneto Banca will today define the price range at which to sell the newly issued shares for a total of one billion euro. The forecast is for a minimum price, i.e. 0,10 euro per share, which the market still considers too high. Hence the probable entry of Atlante as sub-guarantor of the consortium led by Banca IMI. A photocopy operation of the one adopted for Pop. Vicenza. Meanwhile, Atlante is speeding up the negotiations to embark the capital of pension and social security funds (about one billion the goal) in the enterprise of intervening on the NPLs.
RCS, GREEN LIGHT TO OPS IN CAIRO: THE FINAL BATTLE BEGINS
After the go-ahead in extremis from Consob granted on Saturday, everything is ready for Cairo Communications' Ops on RCS Mediagroup. The operation will start on June 13th and end on July 8th. The prospectus does not reveal any significant changes with respect to what is already known. Urbano Cairo focuses on the industrial relaunch of the group with 140 million in cost savings in the first three years as well as an increase in revenues (the tour de France, according to the prospectus, guarantees 110 million in revenues against 25 for the Giro d'Italia). In perspective, the merger between RCS and La7 is also planned.
In the meantime, the president of Turin has not increased his offer (0,12 Cairo Communications shares against 1 Rcs), which is thus lower than both Bonomi's (0,70 euro per share), and the market valuation, 0,76. XNUMX euros, convinced that better offers are on the way from the two contenders. Or, perhaps, by a third wheel. The most popular, despite the denials, remains the Pesenti group.
The prospect of an increase in US interest rates, accompanied by an increase in oil prices, has allowed the Stock Exchanges to experience a week marked by an increase. On Wall Street, the S&P 500 index recorded a 2% increase, the best since the end of March.
With three positive sessions and two decreases, the Milan Stock Exchange also closed the week with an overall increase of 2,1%. The overall index of the Stoxx 600 European Stock Exchanges rose by 3,4%, reducing the loss from the beginning of the year to -4,4%. As regards Piazza Affari, the year-to-date performance of the FtseMib index is -15%.
The banking sector supported the listings, with a view to a recovery in profits: banks and insurance companies in the current scenario of zero interest rates are finding it extremely difficult to obtain acceptable returns on their investments. The Stoxx European banking sector index rose by 5,6% in five days. Insurance +4,9%.
