The collapse of Volkswagen (-19,8% after the -19% blow on Monday) but also the Chinese crisis and the plunge of raw materials. There are ingredients for a perfect storm for the financial markets. Yesterday, notes Giuseppe Sersale of Anthilia, “European equities fell below the levels at the beginning of the year, to the values already observed at the end of 2013, when the euro was in the 1.35 area, oil was around $100 and QE was not not even in predicate. On these bases, it can be said that continental equities are priced, if not a recession, at a growth stagnation”.
Against this backdrop, the markets await Mario Draghi's words: the fall of the euro against the dollar signals the forecast of an increase in European Quantitative Easing. Also because Germany hit in the prestige (and in the wallet) can benefit from it.
IN BEIJING, THE CRISIS IS WORSEN
The latest negative signal came from China this morning: the semi-official (but reliable) PMI index compiled by Caixin slipped to 47 points, to its lowest level since the beginning of 2009, from 47,3 last month. Predictions were for an improvement to 47.5. Shanghai (-2,2%) has thus resumed its downward trend. Down also Hong Kong and the rest of Asia. Tokyo is closed for holidays.
Sydney is also heavy (-1,9%), dragged down by the raw materials sector. Copper is in free fall and brings with it the giants of the sector: Bhp Billiton and Rio Tinto suffer losses of around 4%. Glencore, number one, falls into the void: -10,33% in London.
EVEN WALL STREET PLAYS THE RETREAT
Wall Street was also down last night. The Dow Jones index fell 1,09%, the S&P 500 about 1,2% and the Nasdaq 1,5%. Among banks, Goldman Sachs lost 2,5% on news that CEO Lloyd Blankfein, 61, will undergo a series of chemotherapy treatments to cure lymphoma in the coming months. In the press release, the form of cancer is defined as "highly curable".
Apple loses 1,5%. According to the Wall Street Journal, the company has decided to invest extensive resources in the creation of one of its electric cars, a high-tech vehicle capable of moving autonomously, without intervention by the driver.
The automotive industry was heavy, starting with Volkswagen's American suppliers: Delphi -3,6%, Botg Warner -7,6%.
THE WOLFSBURG SCANDAL OVERWHELMS EUROPE
The Stock Exchanges of the Old Continent are faltering, betrayed by the German car. In Milan, the FtseMib index closed down by 3,3%. The London Stock Exchange lost 2,8%, Paris -3,4%, Frankfurt -3,8%. The Btp/Bund spread widened to 115 points. In fact, Europe is the epicenter of the VW earthquake, perhaps the most serious scandal of German industry.
VW ADMITS: 11 MILLION TAROT CARS
Volkswagen plunged for the second consecutive day: the price is 107,05 euros, the lowest in the last three years. In two days, capitalization fell by 25 billion euros. After the discovery of the rogue software to reduce the harmful emissions of diesels sold in the USA by Wolfsburg, there were sensational developments yesterday: there are 11 million souped-up cars. In other words, the scandal is not limited to the United States but also concerns Europe where diesel is much more widespread. Investigations have been carried out in Germany, France, the USA but also South Korea and Australia.
The criminal investigations by the US and German judiciaries are on the way. Volkswagen has set aside 6,3 billion euros to meet claims for damages which will undoubtedly be much higher. “We will clarify” promises CEO Martin Winterkorn, in response to Angela Merkel. But his seat is shaking: on Friday the board of directors who was supposed to confirm his trust until 2018 could demand his resignation.
CARS IN DISRUPTION: FCA LOSES 6,2%. PSA 8,7%
Inevitably, the Volkswagen scandal also hit Fiat Chrysler (-6,2%) and other European car manufacturers. The concern that sweeping investigations are now starting on all car manufacturers prevails, and perhaps it could come out that the Germans in Wolfsburg are not the only ones who fake the emissions data.
As a result Daimler and BMW lost respectively 7% and 6%, in Paris Peugeot fell by 8,7%, Renault -7,1%. Exor also fell sharply in Milan (-6,3%). Brembo was also down (-4,3%), a major supplier of Porsche as well as other German brands. Other industrialists are also under fire: Finmeccanica ended up down by 5,2%, Cnh Industrial -3,4%.
THE SHADOW OF THE ROBIN TAX SCARES THE UTILITIES
Italian utilities were penalized by rumors about the return, after appropriate adjustments and disguises, of the Robin Hood Tax, abolished by the Constitutional Court in February. The news was denied by the government. The decline of Enel (-4,2%), A2A (-3%), Terna (-1,7%), Snam (-2,9%) was heavy.
Eni fell by 3,8%. Equita sim analysts reduced the target price of the six-legged dog from 17 to 16,5 euros (hold opinion) following the drop in oil prices. Credit Suisse, on the other hand, raised its target price from 15 to 15,3 euros (neutral rating) following the discovery of the gas field in Egyptian waters. Tenaris -1,9%, Saipem -4,3%..
BANKS COUNT WITH THE SREP
Among the banks listed on Piazza Affari, Unicredit lost 2,7%. The market wonders whether the institution will be able to avoid a capital increase after the new requests on capital strength requirements (SREP). Mediobanca Securities analysts cut the target price from 9,1 to 8,1 euro (outperform rating).
Understanding -2,7%. The most violent decline was that of Monte Paschi (-4,9%). Mediobanca -3,74%. The board of directors approved the new governance of the institute which will come into force in 2017. The new provisions provide for a non-executive chairman, the reduction of the number of directors from a minimum of 9 to 15 (from the current 18 and against 15-23 envisaged by the statute), the decrease of managers on the board from 5 to 3. The representatives of the minority list on the board also rise from one to two.
Among the insurance companies, Generali -2,7%.
INWIT COUNTERS THE TREND. OUTPERFORM FOR Mondadori
Inwit goes against the trend (+1,36%). The Telecom Italia subsidiary, which manages a network of transmission towers, has returned to the spotlight after Marco Patuano, CEO of the former incumbent, said the group was open to all options, including the sale.
In the first row among the suitors is Cellnex controlled by the Abertis group of Barcelona, it is listed on the Stock Exchange and has a capital of 3,5 billion euros. The company operates a network of approximately 15.000 towers in Spain and Italy, where it has purchased approximately 7.300 towers from Wind.
In the rest of the market, Mondadori (-0,11%) should be mentioned, on which Mediobanca Securities raised its recommendation from neutral to outperform, with a target price rising from 1,31 to 1,34 euro. All the luxury companies are down: Yoox -4,1%, Moncler -2,9%.
