Trio of records for US high tech, Enel hit in Brazil

Rain of records for Microsoft, Apple and Amazon – Enel wins the Brazilian takeover bid on Eletropaulo – The French state leaves Air France. In May, fewer ECB purchases on Italy

Tom Orlik, chief economist at Bloomberg in Asia, calculated that right now countries led by populist governments account for 41% of global GDP, roughly ten times the percentage a decade ago. In this context, the growing conflict on the tariff front fueled by Donald Trump must be interpreted, as well as the turbulence arriving in the Eurozone, awaiting the summit at the end of the month.

Moreover, stock exchanges give the impression of having already metabolized this atmosphere. Indeed, the Bull is advancing thanks to the good US data and the new push of technology, witnessed by the new all-time record of the Nasdaq, +0,76% to 7.606 points ahead of the Dow Jones (+0,72%) and the S&P500 index ( +0,45%).

MIROSOFT, APPLE AND AMAZON, TRIO OF RECORDS

The most consistent push comes from some Bigs. Microsoft has announced the purchase of GitHub, a community of code programmers paid for 7,5 billion dollars. Record also for Apple, while the Apple app developers conference, now launched in Artificial Intelligence, is in full swing. Amazon is also at the top, on the sixth consecutive day of records.

Meanwhile, the yield curve of US bonds, increasingly flattened, has reached a level not seen since 2007. The spread between the ten-year and two-year bonds has dropped to 42 basis points. At the end of 2006 the curve had reversed, today there is the fear that the phenomenon could repeat itself.

WEAK YEN SUPPORTS TOKYO

Asian stock exchanges fluctuated just above parity this morning, unable to keep up with US price lists. Tokyo's Nikkei is up 0,1%, while the yen weakens against the dollar to 109,9.

Hong Kong gains 0,1%, the CSI 300 index of Shanghai and Shenzhen stock exchanges 0,5%. South Korea's stock market is down 0,1%.

Brent-type oil traded at $75,5 a barrel this morning, up 0,2% from yesterday's -2%. With the OPEC summit at the end of June in Vienna approaching, tension is mounting on the crude oil markets: the OIL VIX ETF, an indicator of volatility, is near the highs of the last 4 months.

Weak yesterday oil in Milan. Eni falls by 0,93%, worse Saipem (-2,72%) and Tenaris (-2,09%) grappling with the duties imposed on Mexico.

MILAN ONLY EUROPEAN EXCHANGE IN RED

In Europe, only Italy closed the first session of the week in the red, on the eve of the confidence in the Conte government. But the easing of the political crisis in Italy has given new life to the bets on a normalization of the ECB's monetary policy. Friday's PMI data remained in line with the flash reading, but Italy's is at an 18-month low.

The euro recovered to 1,1680 against the dollar. This morning it is traded on Asian markets at 1,169 against the dollar, from 1,170 yesterday.

Today the focus will be on trust in the Conte government. The PMI services data will be released in Europe.

ADVANCE MADRID, PARIS: THE STATE EXITS AIR FRANCE

Milan, after a morning with the plus sign, turned red at the end of the session, with a loss of 0,45%, a hair above 22 points (22.010). It was the worst performance in the Eurozone.

On the other hand, the recovery of Madrid continues (+1,19%), after the political upheaval that marked the end of the Rajoy government and the start of the one led by the socialist Sanchez.

Paris also rose (+0,19%), driven by the news that Accor is evaluating the purchase of 14,3% of Air France (+5,47) controlled by the state.

Frankfurt +0,4%. Thursday the chemical and pharmaceutical multinational Bayer will close the acquisition of Monsanto, launched in 2016. The operation, one of the most important in history, was completed for 62,5 billion.

London is also on positive ground, up by half a percentage point.

Great maneuvers in view of the EU summit at the end of the month. German Chancellor Angela Merkel yesterday proposed an internal eurozone budget for investments in weaker member states, with the aim of improving the lifestyle of people in these countries and strengthening convergence between countries using the single currency.

ECB, LESS PURCHASES IN ITALY IN MAY. THERE IS NO PLOT

Meanwhile, the controversy over the purchases of European bonds by the ECB explodes. In May, purchases of Italian government bonds totaled 3,609 billion, down on the 3,9 billion of the previous month. QE's percentage targeting Italy has dropped to 15% from 17%, versus 28% Bund buys. The data sparked protests from the new majority of the Italian government, but Frankfurt replied that "there have been no adjustments in the pace or composition of the purchases of the government bond purchase programme".

The temporary reduction in purchases of BTPs (as well as that of French, Austrian and Belgian securities) would be linked to a previous decline in purchases of Bunds. This is confirmed by Guntram Wolff of the Bruegel Institute: "The numbers only reflect the need to balance the picture after months of overbought Italian BTPs".

THE KING OF BONDS PAYS FOR THE ITALIAN CRISIS

Meanwhile, the Italian crisis cost Bill Gross dearly, nicknamed the "king of bonds", who had bet on the solidity of the Bel Paese's securities. Its specialist fund, the Janus Henderson Global Unconstrained Bond Fund, lost more than 29% on May 3, its worst daily performance ever. The main fault is to be attributed to the fall of Italian BTPs as Gross explained to Bloomberg. His fund had focused on a progressive reduction of the spread between US Treasuries and German Bunds, but the race for safe-haven assets (such as German government bonds), triggered following the Italian political crisis, sharply widened the spread between the US and Germany causing heavy losses. Gross, however, does not change his strategy: the reduction of the spread between US and German bonds, according to him, is only a matter of time.

THE RECOVERY OF THE BTP CONTINUES. SPREAD AT 216

The BTPs closed yesterday with a decisive rise: the spread, which fell below 210 in the session, settled at 216 basis points. The ten-year rate fell to 2,57% from 2,74% at the last closing.

Although declining, the yield differential between the BTP and the Spanish Bono is still very high at 125 basis points (from 129 on Friday).

BANKS UNDER FIRE. UNICREDIT SWITCHES OFF THE SOCGEN EFFECT

The weakness of the banks and some blue chips, led by Fiat Chrysler, caused Piazza Affari to slide into the red, in contrast with the other European markets.

Triggering the selling in the afternoon was news of the ECB's decline in purchases of Italian government bonds in May.

The banking index closed down by 0,86%, the result of the evident weakness of the former Popolari banks: Banco Bpm and Bper Banca, both -2,9%, Ubi Banca -3,16%. Understanding held up (-0,02%). The upward flame on Unicredit (-0,83%) has died down, rising up to 3% in the morning in the wake of renewed rumors about a merger with SocGen.

FIAT CHRYSLER BLACK JERSEY AGAIN

The approaching end of the Marchionne era weighs on the share prices of Fiat Chrysler (-3,63%) which continued to pay profit taking after the expectation of news on the pole was disappointed on the occasion of the Investor day of luxury, information on alliances and news on the succession. In general, however, the new plan it was appreciated by analysts.

FCA's decline dragged down the other stocks in the Agnelli galaxy: Exor -2,48%, Ferrari -0,35% and CNH Industrial -1,01%.

ITALGAS AT THE TOP. ENEL, BIG SHOT IN BRAZIL

Positive day for utilities, favored by the decline in yields on the debt market. Italgas (+2,8%) was the best stock on the FTSEMib, ahead of next week's Capital Markets Day.

Enel also rose (+1,3%). Yesterday evening the electricity group became the leader in energy distribution in Brazil by purchasing 73 percent of the state-owned electricity company Eletropaulo at an auction on the San Paulo Stock Exchange for 5,552 billion reais (about 1,388 billion euros). Enel has also undertaken to carry out a capital increase in Eletropaulo of at least 1,5 billion reais.