S&P CUTS THE RATING OF SEVEN ITALIAN BANKS
IN ALL 15 INSTITUTIONS ARE "SPECIAL OBSERVED"
Standard & Poor's downgraded seven Italian banks, including Intesa Sanpaolo and Mediobanca, and decided to change the rating outlook for 15 credit institutions to "negative", the first step towards a possible subsequent downgrading of the rating. It is the consequence of the lowering of the rating on the Italian debt which is accompanied by the prospect of further deterioration, because the decision, says a note, "does not consider a review of a potential further deterioration in the operational and economic environment of the Italian banking sector" . “Weak operating conditions could affect our view of the economic and industrial risks affecting the Italian financial system, which we analyze as part of the banking industry country risk assessment (bicra) and therefore, likely, the creditworthiness for Italian banks at which we give the rating”, concludes the report card.
The banks that have undergone the downgrading are: Intesa San Paolo, Mediobanca, Findomestic, Banca Imi, Biis, Cassa Risparmio di Bologna and Bnl. Institutions move from A+ to A. Short-term ratings remain unchanged at A-1. Those put in a negative outlook are: Fideuram, Agos-Ducato, Credito Sportivo, Cr Parma and Piacenza, Unicredit and the subsidiaries Unicredit Bank ag, Bank Austria and Unicredit Leasing. Short-term ratings remain unchanged at A-1. BNL's rating was also reduced to A+/A-1.
In Piazza Affari the banks had closed with a sudden and massive decline after a positive session. Intesa fell by 3% (gains 0,3% in the afternoon), Unicredit -2,8%. Mediobanca also fell -3,2% after the results of the fiscal year
THE US ECONOMY IS "ANAEMIC". WORD BY BEN BERNANKE
WITH THE REPUBLICANS' NO, OPERATION TWIST HAS BEEN STARTED
The US economy is "anemic". “Growth remains low, the most recent indicators signal that the state of weakness on the labor market remains, while unemployment remains high”. Furthermore, “household consumption remains low”. The Fed statement does not mince words to underline the seriousness of the slowdown in the economy. In summary, there are "serious risks of a downward revision of growth prospects". To correct the course, the Fed, as already foreseen, thus gave Operation Twist, a large re-edition of the maneuver which in 1961 accompanied the recovery under the Kennedy presidency.
Between now and June, the central bank will purchase government bonds with maturities from 6 to 30 for an amount of 400 billion dollars. Sales of short-term titles will be spread over three years. In this way, the Fed hopes to reduce the cost of money to the benefit of investments and the recovery of employment. On the bond market, the move has already produced its first fruits: ten-year bonds fell nine points to 3,01%, the all-time low, while two-year bonds rose by 4 bps to 0,20%. The 1,87-year bond fell to its lowest yield ever at XNUMX%.
The opposition, both inside and outside the Fed, influenced the two days of the FOMC, which undoubtedly limited Bernanke's range of action. In the Open Committee, the president of the central bank received, as in August, the negative vote of three out of ten members, namely the hawks Charles Plosser from Philadelphia, Richard Fisher from Dallas and Narayana Kocherlakota from Minneapolis. More relevant is the pressure from the Republicans who are clamoring for Bernanke to cease all intervention on the markets. In an unprecedented move, the party staff (House Speaker John Boehme, Senate Leader Eric Cantor, Federal Budget Talks Head Mitch McConnell, and Senator John Kyl of Arizona) asked Bernanke not to take initiative. “We fear – reads a letter sent to the Fed – that further interventions could worsen the state of the economy”. The reply from Barney Frank, one of the most authoritative Democrats, was immediate. "It is one of the most serious attacks on central bank independence in our history." In any case, it is the sign that helicopter Ben's room for maneuver is really narrow.
THE FED DISAPPOINTS WALL STREET: -2,5% FOR THE DOW JONES
MOODY'S HATX HAPPENS ON US CREDIT
The rating agency Moody's downgraded Bank Of America -7,5%, Citigroup and Wells Fargo -3,9% because "it is less probable that the State has the means to operate a bailout in case of need". Goldman Sachs, meanwhile, drops below $100 for the first time. This also explains the very negative reaction of Wall Street after the widely announced decisions coming from the Fomc: the Dow Jones lost 2,5%, the Nasdaq 2. The most conspicuous decline concerns the Standard & Poor's 500 below 2,9%. Energy, raw materials and automotive stocks fell (-4% on average), financials did worse (the sector index -5%). Why such a drastic response? "On Wall Street - jokes a guru of the caliber of Barton Biggs - there was hope for the arrival of a magic pill capable of curing an anemic economy like a cold". Or, more prosaically, many were hoping for a revival of quantitative easing. But Ben Bernanke, despite the statement acknowledging the seriousness of the situation, did not use such a powerful weapon. Perhaps, he fears, because by now he has little ammunition in his barrel. Like the White House, if Moody's judgment applies. Most of all, however, weighs the extremely worried judgment on the economy.
THE ASIAN PRICE LISTS IN DEEP RED
BERNANKE'S JUDGMENT ON THE CRISIS WEIGHTS
The negative outlook that emerged from the FOMC meeting provoked an immediate reaction on Asian stocks. The MSCI Asia Pacific index, which measures the performance of stock exchanges on the continent, excluding Japan, lost 2,4%, now one step away from the lows of the year. The Nikkei 225 index in Tokyo is down, one hour after the close, by 1,8%. The negative performance of financial stocks stands out in the general decline: Mitsubishi Financial loses 2,4%, in Sydney the Macquarie group is down 3,1%. The drop in mining stocks was significant: Bhp Billiton dropped by 3,7%, Rio Tinto by 5,2%.
NAGEL: MEDIOBANCA CAPITAL IS "COMFORTABLE"
TODAY AT THE EXECUTIVE GENERALI THE RUSSIAN JV WITH VTB
Net profit of 396 million (401 million the previous year) after adjustments of 238 million to the portfolio, partly referring to the Telco-Telecom share (120 million), partly to Greek securities (100 million), dividend unchanged. Here is a summary of the Mediobanca accounts which will be submitted to the shareholders' vote on 28 October. On that occasion we will also vote on the new council, almost a photocopy of the current one that is about to expire.
For share C, the former president of French Railways Anne-Marie Idrac takes over from Antoine Bernheim, while Pierre Lefevre, president of Groupama Italia, takes the place of Jean Azema, number one in the group. The industrial partners chose the independent Elisabetta Magistretti, director of Pirelli & C. The conference call with the analysts was held before the announcement of the downgrade of the rating by S&P. Alberto Nagel however stressed on the occasion that the bank, thanks to a Tier 1 ratio of 11,2% at the end of June, is in a "comfortable" position in terms of capital. No increase, therefore, on the horizon. Today the executive committee of Generali will meet in Venice. On the agenda is the Russian joint venture with Vtb, in which the Lion will participate with Generali-Ppf set up together with Petr Kellner (and destined to merge into Generali with the exercise of the put option). The company's investment committee will also be held during the day.
THE MANEUVER IS SUFFICIENT. TREASURE WORD
BUT THE BTP/BUND SPREAD ONE STEP FROM 400
For the first time in history, the yield on ten-year German bunds, offered yesterday at auction, fell below 2% to 1,80%. This too, together with the increase in the yield on BTPs to 5,71%, helped bring the BTP-Bund spread back to 399 basis points. The rumors, later denied, about a new maneuver, the third in a few months, being studied by the government for an amount of ten billion did not help. The Ministry of the Economy excludes the need for a new corrective maneuver despite the fact that it is preparing to reduce the estimates of economic growth.
In this regard, the Treasury says in a note that the 54 billion maneuver is "fully sufficient" to achieve a balanced budget in 2013. On the occasion of the presentation of the Def, the Treasury will reduce the estimate of economic growth for 2011 to + 0,7% from the +1,1% indicated in mid-April. Fears that Greece won't be able to meet its commitments have once again resurfaced among investors, making it impossible to disburse the next tranche of aid in mid-October. Without that money, the Greek state would have to declare bankruptcy. The Greek government has announced that it will launch new austerity measures, but there are now strong doubts about the ability to implement them.
THE DAY OF THE REFUNDS. MOODY'S BLOWS FIAT
S&P TERNA SIZE. ONLY ENEL HAS PASSED THE EXAMINATION
While waiting for the Fed and under the pressure of the alarming news arriving from Athens, the stock exchanges accelerated their descent in the afternoon. In Milan, the FtseMib index fell by 1,6%, London lost 1,7%, Paris -1,5%, Frankfurt -2,4%. It was the day of the ratings: confirmed that of Enel by Standard & Poor's. Standard & Poor's confirmed Enel's rating at level A- for the long term and A-2 for the short term. An excellent result, given the relegation of the Italian company.
“We continue to consider Enel as an entity linked to the state administration but now we consider the link between Italy's sovereign credit and Enel as 'limited' and not 'strong', because, in our view, economic pressures could induce Rome to give a lower priority to providing any sort of extraordinary support to Enel, if needed.
On the contrary, S&P has cut its assessment of Terna's creditworthiness to 'A' from 'A+', leaving the negative assessment of the prospects unchanged. But the heaviest slide was that of Fiat which lost 6,2% after Moody's announced the cut of the rating to BA2, confirming a negative outlook (judgment on future prospects). The provision is already reflected in the cost of 5-year CDS indicated at 950 basis points, not far from the peaks of 1.000 points reached a few days ago (compared to 400 points in June). Among other things, the group does not need to refinance its debt with new bond issues in the short term, after the success of the bond issued in April (1 billion euros at a fixed rate of 6,375%) and after Chrysler refinanced the own debt position last May. Excellent day instead day for Fiat Industrial.
