The agreement on Greece, the resignation of Federico Ghizzoni from Unicredit and, above all, the rally of the markets which are already adjusting to the probable increase in American rates. Here are the hot topics of a day in the name of Taurus, which broke the climate of uncertainty of the last few sessions upwards. The markets finally experienced a euphoric day, perhaps the first of 2016.
The prospect of rate hikes unleashed Wall Street: the S&P 500 index rose by 1,4%, the Dow Jones +1,2%, the Nasdaq rose by 2%. The long wave of the rise hit Asia this morning. Tokyo rose by 1,8% in the middle of the session. Hong Kong does better (+2,5%). Positive ground also in Shanghai (+0,3%).
The trend picked up speed yesterday afternoon in the European stock exchanges which recorded the strongest rise in a month and a half now. The overall index of the Stoxx 600 European stock exchanges rose by 2,3%. Paris +2,5%, Frankfurt +2,3%. Piazza Affari (+3,3%) was the best stock exchange.
All the Stoxx sector indices closed the day positive, driven by the increases of Banks (Stoxx +3,6%) and Insurance (+3,9%).
USA: THE BRICK DANCE IS BACK IN FASHION, BANKS AND TECHNOLOGY FLY
But what is responsible for the trend reversal? What counts is the rise of the dollar, perhaps driven by the agreements reached at the G-7, and of raw materials, oil in the lead. The most convincing fact, however, is another: the US has completely closed the crisis. Families return to buy homes. Along with employment, the use of credit cards dates back. And rate hikes no longer scare the financial markets. The confirmation comes from the numbers, more eloquent than any words.
Existing home sales in the US rose to 619.000 in April from 531.000 in March, a revised figure from 511.000. The 16,6% jump from the March level, in addition to being one of the strongest in recent years, is much higher than analysts' expectations, stuck at 523.000. In April, new home sales recovered to levels not seen since February 2008: the real estate crisis is really behind us.
The financial market, awaiting Janet Yellen's intervention next Friday, seems to have already taken measures in the face of the next rate hike. Two top Fed officials, Patrick Harker and John Williams, presidents of Philadelphia and San Francisco, said that between now and the end of the year, the US central bank could decide two or three increases in the cost of money, with the first probably already in June. The dollar rose to the highs of the last two months against the euro to 1,115, from 1,122 at the close.
The rise of the US currency this time was not accompanied by the drop in oil: Brent at 48,7 dollars a barrel (+0,8%), Wti at 48,6 dollars (+1,1%).
Technology and finance stocks shine on Wall Street. Apple (+1,5%), Alphabet (+2,2%) and Microsoft (+3,1%) fly in the best session of the last two months. Steady increases also for JP Morgan (+1,7%) and Bank of America (+1,6%). Monsanto is also on positive ground (+3,1%) after the no to Bayer: the US company, however, is ready to negotiate better terms for the merger.
T-bonds also rose, but moderately: government bonds with a two-year maturity rose by two basis points to 0,92%, on the highs of the last two and a half months. The spread between the yield on the two-year bond and the 10-year bond, which yields 1,86%, is 94 basis points, the lowest since the end of 2007. The flattening of the yield curve signals that the market is not expects a long season of rate hikes.
WHITE SMOKE FOR ATHENS: HELLENIC BOND IN FLIGHT
At two o'clock last night, after yet another negotiating marathon, the Greek debt deal. The agreement does not limit itself to guaranteeing the disbursement of new funds to Athens after the reforms launched by the Parliament, removing the risk of a new high-voltage summer, but for the first time it addresses the issue of debt, with a series of measures which meet the requests of the Monetary Fund, which will thus continue to participate in the Troika.
Aid of 10,3 billion will be guaranteed in two tranches, the first in June of 7,8 billion, the second probably after the summer. The ESM, the European Stability Fund, will study a short, medium and long-term plan "to be introduced gradually" to reduce the burden of Athens' exposure (311 billion). No immediate cuts, therefore, and no promise of forgiveness on future payments but the commitment to reduce interest to less than 15% of GDP in the medium term and less than 20% in the long term. A solution sufficient to convince the representatives of the Fund to approve the agreement.
Thus a roaring day is looming for Hellenic bonds: yesterday the 7-year bond fell below the XNUMX% barrier.
SPREAD BELOW 130 BPS, 6 BILLION BOTS COMING
The market euphoria has also infected the debt market. The Btp/Bund spread returned below 130 points for the first time in two weeks, while the rate on ten-year maturities fell below 1,45%. The month-end auctions are starting under a lucky star. The Ministry of the Economy will offer six billion euros in six-month Treasuries in the auction on Friday 27 May, with settlement on 31 May.
TREASURY WILL RISE TO 7% IN MPS (+10,5%)
The trigger for the rise was the banks. The fuse was lit by the head of banking supervision of the ECB, Daniele Nouy, according to which the European Central Bank is working on new proposals to speed up the solution to the problem of bank non-performing loans. The Italian banking index rose by 5,46%. Pop Emilia scored +7,88%, Mediobanca +6,08%. Carige gained 6,27%.
Monte Paschi took the greatest advantage, the best stock on the list with an increase of 10,51%. The security also benefited from the hypothesis that the Treasury would rise to 7% from the current 4% following the payment of the residual interest on the Monti Bonds in shares and not in cash, as the Deputy Economy Minister Enrico Morando hypothesized in a interview with Bloomberg: "At the moment – he said – it could be the best solution, which would not create particular embarrassment".
Intesa is also on the rise (+5,1%), selected as Advisor for the privatization of the Russian oil giant Rosneft. Ubi +5,6%.
UNICREDIT: GHIZZONI LEAVES, FAVORITE MORELLI
Field day for Unicredit (+4,8%) awaiting the outcome of the board dedicated to resignation of Federico Ghizzoni. Yesterday evening, after a meeting that lasted two and a half hours, the CEO gave his willingness to leave, also to give a sign of discontinuity to the markets which have penalized the stock in the last six months, which has lost almost 50%. Therefore Ghizzoni has not resigned but will do so when the Bank has identified his successor. The nomination committee led by the institute's vice president, Luca Cordero di Montezemolo, will meet on June 9st in order to designate the new CEO at the board meeting on June XNUMXth.
In pole position for the succession is Marco Morelli, number one of Bank of America in the EMEA region. Other candidates are Alberto Nagel (CEO of Mediobanca), Sergio Ermotti (formerly now at UBS) and Flavio Valeri (Deutsche Bank).
GREEN-WAY OF THE BOD: BANCO BPM IS BORN
Banco Bpm was born, the result of the merger between Banco Popolare (+1,11%) and Bpm (+2,34%). The double go-ahead from Banco Popolare's board of directors and the Popolare di Milano management board yesterday ratified the balance of power between the shareholders of the two banking groups.
After the capital increase in progress, the Veronese shareholders will receive 54,626% of the shares, while the Milanese 45,374%. The Board of Directors (19 members, almost a record) of the holding listed under the name of Banco Bpm will coordinate the two banking realities of the group. President will be Carlo Fratta donkeys, CEO Giuseppe Castagna.
The insurance sector is making progress (+2,9% the Stoxx index for the sector) awaiting the rise in rates and yields. Generali stood out with a gain of 5,8% to 12,84 euros. Yesterday the stock posted a dividend of 0,72 euro per share (yield around 6%). Unipol +4,2%, Azimut +2,8%, Banca Mediolanum +5,1%. Poste Italiane +2,24%.
JP MORGAN RAISES ENI'S TARGET
Day of recovery for energy stocks on the wave of the rise in oil. Eni closes with a 3% gain. JP Morgan raised its target price from 13 to 14 euros and confirmed the neutral recommendation. The experts have reduced the estimates of Eps 2016-2017 and raised those for 2018 to take into account the probable sale of Versalis and oil prices. Tenaris +1,2%, Saipem also climbs (+2,3%), which has also been downgraded by Moody's.
FCA RECOVERY, CITIGROUP PROMOTES MONCLER
Among the industrialists, Fiat Chrysler (+3%) recovers a good part of the strong fall of the day before (-4%), triggered by rumors about alleged violations of anti-pollution regulations. Sergio Marchionne has installed Reid Biegland, head of sales in the USA, at the head of Alfa Romeo and Maserati. Banca Imi confirmed the buy recommendation and the target price at 9,2 euros. Equita Sim also remained positive, with a buy rating and target price of €10,9. Exor +4,3%.
Also noteworthy is the leap of Leonardo (+2,8%), StM (+2,7%) and Cnh Industrial (+3,1%). In luxury brilliant Yoox (+4%) and Moncler (+2,5%): after the closing of the Stock Exchange, Citigroup raised the target price on the stock from 15,5 to 17,1 euros, with a buy rating confirmed. Luxottica (+0,81%) and Ferragamo (+1,2%) also performed well.
THE BLACK JERSEY FOR TELECOM AND SALINI
In a triumphant day there was no shortage of titles against the trend. Sharp decline of Telecom Italia (-2,3%). Exane Bnp Paribas reduced the target price of the former incumbent from 1,1 to 0,8 euros and confirmed the neutral recommendation. The experts have applied a 50% chance to Enel's success +2,7% in the race for Metroweb.
Salini Impregilo sank down by 13,6%, returning to the February levels at 3,17 euros, the worst stock of a session closed up by 3,3%. Kepler Cheuvreux reacted to the new business plan by cutting the recommendation to Hold da Buy with a target of 3,90 euros. More optimistic is Exane, for which the stock remains Outperform, target 4,60 euros.
