The pound went down this morning as the markets of the East opened, once loyal subjects of Her Majesty's currency. In just two minutes, on the back of a violent sell-off, the pound slipped below 1,20 against the dollar to a low of 1,1841, a drop of 6,1%, to the levels of May 1985. Even more the fall against the yen was heavy (-7,3%), while against the euro the drop was 3,1%.
In subsequent trades, the pound regained part of the lost ground, settling at around 1,24 (-1,5% compared to the close on Wall Street), but not many believe in the hypothesis of a technical failure or a wrong command to the computer. There is some method behind the hand that has propelled computer vends:
1) the crash occurred at the end of a troubled week, in which the pound has already lost 4,6%;
2) faced with Prime Minister Theresa May's diktat, who affirmed her willingness to limit freedom of access to the United Kingdom, the European Union is ready for a tough response, as requested by French President François Hollande;
3) the collapse has the flavor of a premeditated ambush, starting from the moment of the blitz: shortly after the closure of American trade, in a moment of sluggish markets, ready to face the key event of the week: the data on employment Use of this afternoon.
A more tense start for a day that promised to be already hot was not possible to imagine. The underlying theme for the markets remains that of rate hikes, an almost certain figure in the USA in the event that today's employment numbers confirm the recovery trend signaled yesterday by the data on unemployment benefit claims which fell close to the lows of the last 43 years.
The peremptory tone of the minutes of the last ECB meeting (confirmation without yielding of Qe) has not completely erased the doubts about the possible tapering, ie the forthcoming reduction in the purchases of securities by the European Central Bank. But, for now, Frankfurt's policy does not change. On the subject of interest rates, Europe and the USA are following divergent paths.
THE DOLLAR RISES, THE YUAN DOWN. ASIAN EXCHANGES WEAK
And so, at the start of the day which will in any case be remembered as Pound's Black Friday, the markets look like this:
– The dollar index, i.e. the quotation of the US currency with respect to the most traded currencies, marks its highest level since last July.
– The yield on the 10-year Treasury Bill hits a three-week high at 1,71%, up from 1,69% yesterday.
– Futures give a 62% chance of a rate hike before the end of the year, up from 50% 10 days ago, before statements from Federal Reserve members and better-than-expected macroeconomic data.
– The spread between the yield on the two-year Treasury and the Bund of the same maturity rises to a level not seen for 10 years.
– The Asian stock markets were calmer: Hong Kong -0,4%, Tokyo -0,2%, still at record levels at the end of a week which saw the yen (this morning +0,2%) down against the dollar. Today the holiday week of the Chinese stock exchanges ends and the climate is heating up: today the yuan is back to its lowest since July against the dollar at 6,71 (against 6,77 recorded on the eve of the Golden week).
DASH TWITTER. BUFFET COMES OUT OF WRIGLEY'S CHEWING GUMS
Expectations on Wall Street yesterday: the Fow Jones index fell by 0,07%, S&P -0,05%. The Nasdaq fell 0,17%. The thud of Twitter (-20,1%) weighed on the technological list after it became known that both Walt Disney and Alphabet withdrew from the tender for the purchase of the bird.
Warren Buffett has announced the forthcoming sale of his 20% stake in Wrigley's, the global leader in chewing gum. The controlling shareholder, the confectionery giant Mars, will buy. Buffett's share had been paid 2,1 billion in 2008. "I have never had a better experience than this both from a human and financial point of view" wrote the essay from Omaha, convinced however that the new taste trends of Americans (less sugars, more healthy foods) will weigh on the sector.
Wal-Mart drops 3,2%. In anticipation of the meeting with shareholders, the company has announced that it expects flat earnings for next year. For the current fiscal year, which ends in January 2017, Wal-Mart confirmed estimates for profits of between $4,29 and $4,49 per share.
OIL ADVANCES. RIYAD UNVEILS THE ACCOUNTS OF ARAMCO
Despite the rise of the dollar, the march of oil continues, up by about 15% in the last seven sessions. Thanks to the drop in US inventories, Brent has risen to 52,38 dollars a barrel, Wti trades above 50 dollars. At Piazza Affari Eni closed unchanged, Saipem +0,8%. Ahead of the 2018 flotation of Aramco, the world's largest oil producer, Saudi Arabia has announced that for the first time it will publish the company's financial data for 2015 and 2016 as well.
MILAN FLAT, BLACKROCK CLOSES SHORTS ON BTPs
The European stock exchanges closed a session with frequent ups and downs in parity, testifying to the climate of uncertainty that envelops the financial markets. In Milan, the FtseMib index (+0,09%) finished the session at 16.492 points, up 0,09%, after a brilliant start followed by heavy selling. Paris +0,09%, Frankfurt +0,09% and Madrid +0,02% are also positive, while London is downgraded by 0,28%.
In the budget law for 2017 there will be tax incentives for 17 billion. This was stated by the Minister of Economic Development, Carlo Calenda: "We have provided 17 billion in tax incentives in the Budget law, a size never reached before, because we want to give a shock to investments".
In the two-year period 2017/2018, Germany will finalize a tax relief plan for a total of 6 billion euros, a measure made possible by the good health of the economy and by the rigor on public finances which allows for the necessary flexibility. This was announced by Angela Merkel, recalling that debt cancellation is not a fetish but a necessary element.
Busy day on the secondary. Lively morning after the official denial of the ECB, afternoon more cautious awaiting today's data on US employment. The Italy/Germany yield gap closes at 137 points, in line with the previous day. The 1,358-year trades at 50%. the 13-year-old yields 2,92 basis points and returns 2,85% (against the placement at XNUMX%).
Blackrock fund manager Josef Prokes said yesterday that the US management giant has closed its short positions on Italian government bonds.
REVENGE OF THE BIG BANKS. DB STUDYING THE ASSET MANAGEMENT IPO
The rise in rates is generally negative news for the stock markets, but it can instead represent a breath of fresh air for the balance sheets of banks and insurance companies, which with zero rates see their profits reduced. Hence the positive behavior of European banks (EuroStoxx of the sector +0,8%) with Société Générale up 2,6% and Bnp Paribas up 2,5%.
Deutsche Bank -0,29%. The bank must carry out a new examination of its industrial model in order to maintain margins in a long-term perspective by adapting to the marked fall in rates. "However, it is not the only bank that has to do it," said Christine Lagarde, head of the International Monetary Fund. The German institute, she added, "must decide what size to take and how much it wants to strengthen the budget". The Bank, writes the Financial Times, could proceed with the IPO of its Asset Management division.
AMUNDI'S OFFER FOR PIONEER PUSHES UNICREDIT
In Milan, Unicredit gained 2,2%, thanks also to rumors about a very generous offer from Amundi (4 billion euros) for Pioneer. Poste Italiane (-2,02%) is looking for a financial partner for the relaunch: the initial proposal, in consortium with CDP and Anima (-2,72%), is around 3,4 billion. If the value of the sales were confirmed, according to Equita, the CEO Jean Pierre Mustier could renounce the sale of Fineco (-0,39%). September net inflows of the company led by Alessandro Foti amounted to 224 million euro, 3,585 billion since the beginning of the year. The Piazza Gae Aulenti institute, together with other banks, will also sell the share in Concardis, a German company that provides payment services.
Yesterday was also a positive day for Intesa (+0,7%), Ubi (+1,2%) and Mediobanca (+1,6%).
MPS DROP BELOW 500 MILLION. SALT AZIMUTH
However, the landslide of Monte Paschi continues (-3,3%), now under 500 million capitalization, just over the 400 million that the bank will have to repay next week to Banco de Santander. The market is selling shares and buying subordinated bonds by betting on a convenient conversion as part of the capital strengthening operation
Among the insurance companies, Generali +1,3%, Axa +2,9%. In asset management, Azimut rose again (+1,97%), despite Mediobanca Securities reducing the target price on the stock from 17,4 to 16 euro, confirming the neutral recommendation.
On the other hand, a positive evaluation by Piazzetta Cuccia brokers supported the purchases of Banca Ifis (+2,3%) and Banca Mediolanum (+0,65%), securities included together with Cerved (-0,4%) and Beni Stable (-2,49%) in the short list of the most promising stocks.
LENGTHEN SAFILO, WELL PRYSMIAN AND STM
A day of decline for utilities, held back by the prospect of the increase in the cost of money. Enel lost 0,5% despite Macquarie raising the target price to 4,8 euros from 4,6 euros and confirming the Outperform rating. Terna -1,1%, Atlantia -1,4%.
Among the industrial stocks, the increases in StM (+1,3%), promoted by Liberon Capital (target at 8,5 euro), and Prysmian (+1,3%), on which Goldman Sachs raised the target price, stand out from 20,5 to 24 euros, confirming the neutral recommendation.
In luxury, the chair dedicated to eyewear: Luxottica goes down (-1%) while the rise of Safilo stands out (+6%). Citigroup confirmed the buy judgment and Tod's target (55 euro) +0,5%.
