The word to Mario Draghi. Thursday's ECB directorate meeting is undoubtedly the highlight of the week. The markets take for granted a further expansion of the quantitative easing maneuver, but the extent of the maneuver is debated. The most popular hypothesis envisages an increase in the size (from 60 to 80 billion a month) and in the duration (until September 2017) of the purchases. Furthermore, negative rates on deposits should rise to -0,30% (possible exemption for the compulsory reserves of institutions).
In recent days, the hypothesis of extending purchases to include mini bonds or even packages of problematic loans has been circulating. “The only thing missing – Alessandro Fugnoli jokes – is the adoption of prison sentences for bank managers who will not increase their jobs”. Certainly, the market expects a "strong" maneuver after the repeated messages from the ECB.
Meanwhile, today will be a historic day for China. The IMF is preparing to promote the yuan to the club of currencies that make up the special drawing rights. It is a great victory for the Beijing leadership, in the midst of the long march to give credibility to Chinese finance. However, there is still a long way to go, as demonstrated by Friday's blitz against the main brokers in Shanghai, targeted by the authorities for the illegal practices behind the collapse in August. Meanwhile, Beijing's central bank continues to support the exchange rate by selling US bonds and German Bunds, thus favoring the work of Draghi and the Fed.
Next Thursday's hearing of Janet Yellen in the Senate will be the key event in a week full of speeches by various Fed members. The countdown to the x hour has now begun: the press conference of the same Yellen at the end of the board meeting in mid-December, when the first increase in US rates since 2008 will be officially announced. But the real objective of the Central Bank is to reassure the stock exchanges: the increases will be gradual and staggered over time, the members have been repeating for weeks of the board.
MILAN FROM JANUARY +18,8%, SPREAD TO 94
Almost absent from Wall Street, in the midst of Thanksgiving Day and Black Friday, the market spotlights were focused on Europe. Draghi's bazooka was, at least for now, sufficient to prevail over the tensions between Russia and the Turks and the terrorism emergency. The balance of the last five sessions for the FtseMib index is a rise of 2% (today it closed unchanged). Year-to-date performance is +18,8%. Out of five trading days, Piazza Affari only closed down on Tuesday (-1,5%), the day the plane was shot down. The overall index of the Stoxx 600 European Stock Exchanges ends the week with a gain of 0,5%, which brings the performance since the beginning of the year to +12%.
The yield on government bonds also fell sharply, after the excellent outcome of the month-end auctions: the BTP was traded at 1,39%, the spread with the Bund fell to 94. The 5-year bond it hit an all-time low at 0,37%.
WALL STREET, FLAT FORECASTS
With the quarterly season over, Wall Street's attention is already focused on forecasts for 2016, the first year of US rate hikes. The forecasts of the big brokers are based on prudence. Goldman Sachs expects a flat trend for the next 12 months (S&P 500 index at 2.100 vs. current 2.090).
Bank of America speaks of a potential upside in the order of 5%. Morgan Stanley is even more cautious. In essence, the big names do not believe that Wall Street will be able to absorb the double blow of rising rates and the strong dollar without falling.
IN THE MILAN FAIR DIARY
The capital increase of Fiera Milano kicks off this morning: 31.126.821 new shares will be offered at the rate of 3 new shares for every 4 already held at the unit price of 2,245 euro. The operation, which will end on 14 December, will be used to finance the M&A activity.
MPS AND BANCO POPOLARE SUPPORT THE BAD BANK
In evidence today the banking sector. After the positive outcome of the examinations conducted by the European supervisory authorities on the capital levels of Italian credit institutions (but also on liquidity, governance and business models) and the rescue of the commissioned banks, the Bad Bank dossier is picking up speed, even if Economy Minister Pier Carlo Padoan specified in an interview with Corriere della Sera that "we won't make a decision before the end of the year: first we need to implement the Sbilità law". To overcome the EU objections and speed up the process, according to Il Sole 24 Ore, the hypothesis of more news is taking shape in which to channel problem loans with the guarantee of the CDP. In the spotlight, waiting for a solution, the banks most afflicted by problematic loans such as Monte Paschi and Banco Popolare.
BRAZILIAN TROUBLE FOR GENERALS. BEIJING PROMOTES UNIPOL
Tile from Brazil for the Generali Lion. The arrest of André Esteves, CEO of Btg Pactual, as part of the corruption investigation against Petrobras will have a negative effect on the company's fourth-quarter results, underlined a note from Mediobanca Securities. Indeed, in September Generali completed the sale of Banca della Svizzera Italiana to Banco Btg Pactual for a consideration of 1,248 billion Swiss francs, of which 1 billion in cash (approximately 900 million euro) and the remainder in Btg Pactual equity instruments listed on the São Paulo Stock Exchange.
But the shares of the Brazilian company, also a major shareholder of Monte Paschi, have lost more than a quarter of their value after Esteves' arrest. Generali has a lock-up on this stock until March, with the result that it cannot help but suffer any capital losses.
Good news instead for Unipol. The Chinese rating agency Dagong has started covering the title with BBB+, two steps above the Italian Republic's debt report card. A good calling card in view of Beijing's next Italian investments.
FCA ON THE ATTACK WITH THE LOW COST
After a brilliant week, the automotive world is aiming for confirmation. In this regard, Volkswagen's sales figures, which will be published on the same day, are decisive. Meanwhile, FCA is expanding the range of the Fiat brand with the launch of the new Fiat Tipo, a compact three-volume sedan that also aims its cards at the "shock price" which starts at 12.500 euros.
TELECOM
December full of news for the former telecommunications incumbent, Telecom Italia. According to Il Sole 24 Ore, between now and the shareholders' meeting on 15 December, Vivendi could increase its stake from the current 20% to just under 25%.
In the meantime, the process of selling a stake in Inwit has begun: with a note, Telecom formalized the expected opening of the Inwit valorisation process, asking potential investors to express interest in taking over 45% of the tower company. Telecom Italia currently holds 60% of Inwit, after listing the remaining 40% in the summer. At current market values, and without considering any control premiums, the package for sale is worth over 1,3 billion euros.
In pole position to become the new reference partner of the towers is the consortium made up of Cellnex-F2i. However, the procedure should see the US private equity Providence, the Mediaset subsidiary EiTowers and American Tower among the players in the window.
Meanwhile, as far as Inwit is concerned, Equita analysts suggest that the group of towers is considering the possibility of exploiting the current legislation to proceed with the redemption of the goodwill, an operation possible by paying a tax close to 16% and amortizing the goodwill over ten years.
"This, if applicable to the entire goodwill on Inwit's balance sheet (1,4 billion), would lead to an upfront payment of around 220 million and a positive net present value of around 100 million" is the analysts' calculation.
