“It's been a while since we've seen a sitting change its face so suddenly”. Here is the story of Giuseppe Sersale, the Anthilia strategist who experienced the turnaround live. “We arrived in the early afternoon with the European markets at their highest levels for the year, the euro above 1.08 and yields rising on the US and German curves. But Wall Street's reaction to such good humor has not been what was expected. US indices tried to capitalize on European strength, but were quickly dragged down by the banking sector, and to a lesser extent by autos and small caps.
But what happened? There are several explanations: a) the difficulties of Donald Trump who at the moment does not have the votes to pass his Healthcare reform, not even in the House. Markets have become convinced that the same will happen to tax reform and other initiatives underpinning the post-election rally. b) The banking crisis (-3.% for the sector). There is a risk of deregulation returning to the table, while the slowdown in the stock markets could slow down the rise in interest rates.
The Wall Street correction had the effect of a bucket of cold water on the European stock exchanges, supported in the morning by the French pre-election polls in favor of the centrist Emmanuel Macron and by the new instructions from the ECB on non-performing loans. In the Old Continent, however, bankers closed in positive territory.
NEW MISSILE FROM KOREA. TOKYO AND SHANGHAI SUFFER
Asian Stock Exchanges fell this morning on the wave of Wall Street. In Tokyo, the Nikkei index falls by 2% despite the growth in exports, at the highest level for two years. The yen is at its highest against the dollar. All the other lists are down, crushed by the decline of the banks.
China's stock markets are down, but Trump's problems perhaps have nothing to do with it: tonight the Central Bank was forced to inject new liquidity, it is the third intervention in three days. It seems that some small banks are risking default. Hong Kong -1,4%, Shanghai -0,7%. The Seoul Stock Exchange loses 0,6%, that of Mumbai by 0,8%.
To make matters worse is the news of a new missile launch by North Korea. According to initial information, the operation ended in a flop.
Not since the beginning of October, i.e. before the election of the new president, has Wall Street experienced a session with a fall of more than 1%. Yesterday, however, the spell was broken: the Dow Jones Industrial lost 1,14%, the S&P 500 -1,24%, the Nasdaq, which had also set a new record at the start, closed at -1,83 .XNUMX%.
TRUMP IN HEALTH DIFFICULTY, THE BIG BANKS USA COLLAPSE
Banking stocks, the stocks most sensitive to rate hikes, were hardest hit by the prospect of a slowdown in the president's plans: Bank of America slipped 5,77%, worst stock in the S&P 500 index, Goldman Sachs ( -3,72%) dragged down the Dow together with Morgan Stanley (-4,3%). A warning to the banks arrived yesterday from William Dudley, the president of the New York Fed, in his speech in London, the member of the board of the central bank of the United States said that there is a need to improve corporate culture.
The Treasury Bill dropped to 2,43%, from 2,46% on the previous day: the XNUMX-year benchmark returned to the levels of three weeks ago. The soft tones of the Federal Reserve on the cost of money are prompting the market to revise its expectations on the trajectory of interest rates.
The dollar fell, traded at 1,0809 against the euro. Difficulties are emerging within the Republican party to consolidate a majority on the Obama care reform project, a project strongly desired by President Trump. The president attended a meeting of parliamentarians and senators from his party, reiterating that until the Obama-care reform is approved, neither the tax reform nor the infrastructure investment plan will be launched.
Oil also slipped to its lowest level for the year: the WTI lost 88 cents to 47,34 dollars a barrel, Brent to 51,1 dollars (-0.9%). Eni, brilliant at the opening, reduced the increase to +0,4% from +1,2%. Saipem closed with an increase of 0,7%, Tenaris -1,3%.
EUROPE APPLAUDS MACRON
Two-speed session also for the European Stock Exchanges which, until the opening of Wall Street, benefited from the French political news and from the document published yesterday by the ECB with the guidelines for the disposal of Non-performing loans (Npl), which contains less drastic indications than expected. Futures anticipate a negative open.
In Milan, the Ftse Mib closed down by 0,25% at 19.918 points, after reaching a high for the day at 20.253. The negative trail also affected the other European lists: Frankfurt -0,8%, Paris -0,3%, London -0,7%
French polls show that Emmanuel Macron emerged victorious in Monday night's televised debate with his Elysee seat rivals. ING's strategists believe that the Paris spread would be 25-30 basis points lower excluding the political risk weighing on bonds.
The BTP closed a session on the rise characterized by a certain appetite for risk. The expected Tltro refinancing of the ECB also favored Italian securities: according to Reuters, banks will borrow 125 billion euros. Today the banks of the Euro zone will in fact have the last chance to obtain four-year loans from the European Central Bank at extremely convenient conditions, according to the scheme envisaged by the TLTRO programme.
The jump in the spread, despite the good performance of the Italian secondary market, is due to the replacement of the new benchmark, expiring in June 2027, with the previous one (expiring in December 2026). The old 50-year benchmark rose by 2,310 cents for a yield of 185% and a spread with the 194-year Bund at XNUMX basis points, down sharply from yesterday's close at XNUMX.
The Economy Minister, Pier Carlo Padoan, said he was satisfied with the meeting he had with the head of the European Antitrust, Margrethe Vestager, on how to implement the precautionary recapitalization of Banca Mps. The plan should envisage that the Ministry of the Economy will put the remaining 4,5 billion on the plate plus another 2 billion to compensate savers holding subordinated bonds. Padoan denied that Vestager also discussed the two banks in the Veneto region, whose request for precautionary recapitalization is "initially being examined by the ECB".
MARCHIONNE: “FCA-VOLKSWAGEN? I CAN'T WAIT TO TALK ABOUT IT"
On the European Stock Exchanges, the strongest declines are in commodity stocks (Stoxx of the sector -2,8%), Technology (-1,5%) and Automotive (-0,9%). Piazza Affari has adapted to the European movement with the drastic reductions of Stm (-4,2%), Fiat Chrysler (-3,7%) and Cnh Industrial (-2,7%).
Sergio Marchionne, in Geneva for the SGS assembly, said about the openings of Volkswagen CEO Mathia Mueller: “We look forward to meeting him. We are 4, 5 cats worldwide, if there is something to be done, it will be done. I haven't seen Mueller for 6-7 months, but I go to see him at the first opportunity". In recent weeks Marchionne had said that GM is the preferred partner for a merger, adding however that he sees the possibility of talks also with Volkswagen.
Even Mueller, after a few days, still speaking to journalists, replied that talks were possible. Analysts believe that the operation makes sense from an industrial point of view also due to the strong presence of FCA in the USA, where Volkswagen is weaker and the situation reversed on the Asian markets, with the German group strong and FCA almost absent.
The Paris prosecutor's office officially opened yesterday an investigation into the Fiat Chrysler group in relation to alleged manipulations of diesel engine emissions. An FCA spokesman said the company acknowledged the prosecutor's decision, reiterating "once again" that its vehicles are fully compliant.
AND MODELLERIA BRAMBILLA PREPARES THE ENGINE FOR WOLFSBURG
Worth noting is the new success of a small company listed on the Aim: Modelleria Brambilla +36% has signed an agreement with Volkswagen (value of 430.000 euros) for the production of equipment for a four-cylinder petrol engine, one of the top models of the German giant.
CLOSING OF THE OFFER FOR VENETIAN BANKS POSTPONED
The banks were saved. Protagonists of a vigorous rise until mid-afternoon, they reduced the gains in the end. Intesa rose by 0,8%, Banco Bpm +3,2% (up 6,7%), Bper Banca +3%. Negative ending for Unicredit (-0,8%) and Ubi (-0,4%). The ECB document does not set final deadlines for reducing the burden of non-performing loans, but says it is up to individual banks to set "realistic", albeit "ambitious" timescales. This means that managers will be able to act with flexibility and the risk of new capital increases will be removed.
Meanwhile, the deadline to adhere to the proposed settlement offer by Banca Popolare di Vicenza and by Veneto Banca, initially scheduled for today, has been postponed to Saturday. The branches of the two institutes will remain open until 18.45. Weak insurance companies: Generali -0,2%, Unipol -1,6%, UnipolSai -0,9%. However, the strong increase in Cattolica continued (+3,5%).
THE TENDER OFFER FOR PARMALAT FAILS. ONLY 24 HOURS ALWAYS IN ORBIT
Lactalis' takeover bid on Parmalat did not go through. The French shareholder raised only 89,59% of the capital, failing to exceed 90% and trigger the delisting procedures. .
Enel up (+0,72%): Barclays confirmed the overweight recommendation and the target price of 5 euros after the 2016 accounts.
Little move Telecom (+0,18%), on which Mediobanca Securities, 48 hours after the board of directors, reiterates the outperform opinion, target 1,34 euro: the share's upside potential is considered "significant" considering the current stock market prices, the results of the first quarter, the renewal of the board of directors and the consolidation of the French or Brazilian telecommunications sector.
Leonardo is down (-1,68% to 12,89 euros): Banca Akros has lowered its rating to accumulated from buy, with the target price rising to 16 from 15 euros.
Il Sole 24 Ore continues to fly, with strong trading, +29,3% after the projections of the plan to 2020 which see a positive EBIT already in 2018. Mondadori, on the other hand, drops 1,89% on the day of the 2016 results.
