Wall Street cancels all 2018 gains. The Federal Reserve's Beige Book accuses the protectionist policy of the White House as the cause of the slowdown in the economy, thus replying to the president who shifts his attention to the caravan of migrants arriving from Honduras, a calamity that could prove invaluable in view of the elections. In short, it is unlikely that the central bank will let its guard down on rates. Meanwhile, the former Fed chair, Janet Yellen, raises the alarm on the solidity of credit to the economy, while she slows down the sale of new homes more than expected. In short, October is confirmed as a month at risk for price lists. And if Wall Street risks a bad cold, Italy is already suffering from a fever, without being able to hope too much this time in the thaumaturgical virtues of Dr. Draghi.
TOKYO -11% IN OCTOBER
Here is the picture, not very comforting, at the start of a day that promises to be difficult.
- In Tokyo the index Nikkei loses 3% in the final session. In October, the Japanese Topix index lost 11%, the worse it did South Korea -12% . China's price lists go down, but a little less: Shanghai -1,4% Hong Kong -1,7%.
- Japanese Prime Minister Shinzo Abe and Xi Jingping meet today: Trump's offensive favors the rapprochement between the two eternal enemies.
- Lo yen, the refuge currency for Asia, appreciates at 112 against the dollar. Bank of Japan vice president Masazumi Wakatabe confirmed that monetary policy is not changing, also because stopping bond purchases could send the country into a recession.
NASDAQ RECORD LOSS, 14 SEATS DOWN FROM 15
The situation on the US markets is dramatic: the Dow Jones lost 2,43%, the S&P 500 3,08%. The Nasdaq he dropped as much as 4,43%, under pressure from the chip index which recorded a decline of 6,6% after the losses accused by Texas Instruments.
Volatility returned to the markets, the Vix indicator shot up 25 points, a level not seen since February.
In October there have been 14 bearish sessions so far, if it were to reach 15, we would find ourselves in a situation last seen about ten years ago. To find 15 bearish sessions in a month, you have to go back to the middle of the dramatic 2008.
GOOD MICROSOFT ACCOUNTS, THE RESURRECTION OF TESLA
The comfort note comes from the accounts of Microsoft (+2,7%) after the Stock Exchange. But far more sensational is the resurrection of Tesla (+20%) on the wave of an unexpected quarterly profit. More importantly, it delivered 87.250 Model S cars in the quarter, leading the world in the electric car.
GOLD RISES, OIL FALLS
- Investors fleeing stocks seek refuge in thegold, on the highs of the last three months at 1.237 dollars an ounce.
- Also research bonds: the yield of Treasury Note, the 3,10-year reference bond, falls to XNUMX%.
- In the aftermath of the publication of the data on inventories of Petroleum in the United States, up more than expected, Brent-type crude fell to the lows of the last two months at 76,2 dollars a barrel.
- Well in Piazza Affari Saipem thanks to the confirmation on the 2018 guidance.
THE EURO FALLS, THE BLACK JERSEY AGAIN
the fall ofeuro below the wall of 1,14 on the dollar and the simultaneous descent of GBP at 1,2865 against the US currency, they signal the suffering of the Old Continent on the eve of the ECB meeting which should be dedicated to exiting the Qe purchase programme. The PMI data on the economic situation, the worst for 25 months, yesterday confirmed the significant slowdown in the economy, starting with the German locomotive. The enlargement of the spread (322 points at the end of the session) and the downward spiral of the prices of Italian banks which anticipated the effect of the forthcoming Standard & Poor's verdict. In short, there are all the ingredients for the perfect storm.
Here is the picture waiting for a session of a session that promises new thrills:
Business Square -1,69% closed on the lowest since February 2016 at 18.485 points.
Less heavy the descent of the other exchanges of the Old Continent: Frankfurt -0,73%; Paris -0,29% Madrid -0,36% Zurich -0,27%.
Solo London +01,2% closes with a plus sign but the pound trades down 0,5% against the dollar on growing fears for the failure of the Brexit negotiations.
THE SPREAD DOESN'T STOP. TRIA: THIS DOESN'T GO FAR
The situation on the debt market is much more dramatic.
The yield on the 10-year BTP rose again to 3,61%. The spread with the ten-year Bund has broken through the threshold of 320 points and stops at 322.10 (+2,42%)
The deterioration began around mid-afternoon and brought the spread between ten-year BTP and Bund rates to 323 basis points at the end, after a peak at 325 and an opening at 311 basis points.
"We cannot go on with this spread for long”. Thus the Minister of Economy Giovanni Tria denied the gasconates of Luigi Di Maio and Matteo Salvini who insist on challenging Brussels, despite the calls for prudence by Prime Minister Giuseppe Conte. "The current level of spread between XNUMX-year BTPs and Bunds is not sustainable - Tria said - because it can damage the weakest part of the Italian banking system over time" one month after the ECB's stress tests on banks: "There we will see the situation and how to intervene” concludes the head of the Economy.
THE CASE OF ITALY TODAY BEING EXAMINED BY THE ECB
More bad news could come from the ECB meeting today. In fact, the directorate should establish the rules for the reinvestment of coupons and expired securities, i.e what will remain of Qe after the program closes. Italy, wrote the Financial Times, runs the risk of being penalized because, in the last five years, there have been significant changes, in terms of economic growth but also of population, the two criteria identified for establishing purchases. It is not certain that Frankfurt will adopt such a fiscal policy, but the current relations between Rome and Brussels do not lead to optimism.
"I don't expect the situation on the Italian market to improve in the short term: an attempt is being made to decipher a sensitive political agenda. The government is already campaigning and is looking at the European elections on the one hand and the possibility of early elections on the other,” commented Andrew Milligan, head of strategies at Aberdeen Standard Investments in Edinburgh. The head of Commerzbank's bond strategies, reports Bloomberg, believes that at this point, to give relief to Italian bonds, it would take a collapse of the Government Majority.
On the occasion of the placement on the six-month Treasury bond on Monday 29 October, the Ministry of the Economy will make available to investors 6 billion euros of the Bond 30 April 2019.
THE STORM ON THE CHIPS KILLS STM
Also in Piazza Affari, in line with the Nasdaq, the abrupt drop in chips was broadcast. The worst title was stm -10,16%. The chip maker presented positive data for the third quarter but, the company's forecasts confirm, growth will slow down in the last part of the year.
BANKS IN THE STORM. MPS LOSES ANOTHER 5%
The poor performance of Piazza Affari can be explained by the suffering of credit securities: the banking index lost 3,3%, well over the -1,2% of the European Stoxx. The most solid stocks closed sharply lower, from Understanding – 3,43% y Unicredit and Mediobanca, both -3,37%. The more volatile banks are doing worse, such as Mount Paschi -5,34% Bpm bank – 4,76%e Carige -6,12% . The Genoese institute corrects after the initial leap triggered by the confirmation of the capital plan by the end of November and the assignment to Ubs to sound out any strategic alliances.
LUXURY IS SAVED, PROMOTED BY MONCLER
A positive note comes from luxury, after the comforting accounts of Kering. They advance Moncler +2,3% and Brunello Cucinelli +2,4%, marking time Salvatore Ferragamo. MainFirst has upped the recommendation to Neutral from Underperform. Target revised to 19,50 euros from 17,50 euros. Luxottica + 0,7%.
DI MAIO THREATENES VETO ON MARELLI
On positive ground too Ferrari +0,2%. Instead, he misses out Fiat Chrysler -2,5% hit by political controversy after the announcement of the sale of Magneti Marelli. Luigi Di Maio threatened the use of the Golden Power, even if he acknowledged that the implementing decrees to use the measure in this case are still missing. The intervention of the undersecretary for economic development, Michele Geraci, was immediate and specified that the government does not intend to use the golden power to block the sale.
It gets noticed Piaggio +4,2%. Equita raised to Hold from Reduce, reducing the target to 1,90 euros from 2,15 euros. Mediobanca has raised its recommendation to Outperform from Neutral, the target rises to 2,50 euros from 2,19 euros.
