BTp, spread back above 240 points
The spread between BTp and Bund on the secondary market MTS of European government bonds is back above 240 points in the aftermath of the dissolution of the Chambers in Italy after the end of the Draghi government and the moves of the ECB. The differential between the ten-year benchmark BTp (Isin IT0005436693) and the same German maturity is indicated at 241 basis points from the 237 points of the final, when it had jumped up to 243 basis points from the 221 points of the Wednesday final. The yield on ten-year bonds also goes back to 3.63% from 3.58% at the end, when it reached a peak in the early afternoon at 3.75% after the ECB.
Eurozone, SMEs report contraction
In July, the Eurozone falls into a contraction zone with pressure on prices slowing but remaining high. From the reading of the preliminary ‘flash’ data, the seasonally adjusted S&P Global Pmi Composite index of the Eurozone in July dropped to 49.4 from 52 in June. Positioning itself on a value below the no-change threshold of 50, the July PMI indicated the first contraction in economic production since February 2021. The figure for the area is driven by the sharp slowdown in activity in the sector.German economy, the first recorded so far in 2022 and the worst performance in over two years: there is a decrease in both domestic and export demand as a combination of an uncertain economic environment, supply shortages and reduced customer budgets. Expectations for the future plunged into negative territory for the first time since May 2020, at the levels of the first wave of the Covid pandemic. “L’French economy is approaching stagnation at the beginning of the third quarter of the year. “S&P Global writes in the publication of the SME indices. After the sharp slowdown observed the previous month, the manufacturing and services sector have once again marked the pace. L composite index is at its lowest level in 16 months.
Tokyo stock market, seventh rise but fear of contagion
Another positive closing, the seventh consecutive for the Tokyo Stock Exchange, helped by the earnings of the day before Wall Street, reassured by some less negative than expected company results, such as those of Tesla. The Nikkei lead stock index gained 0.4% to 27,914.66 points, appreciating 4.2% over the past week and returning to its highest closing level in a month and a half. The broader Topix index rose 0.28% to 1,955.97 points, however weak economic indicators and the seventh wave of Covid-19 are worrying, with over 180,000 new daily cases recorded yesterday in the archipelago, a new record national since the beginning of the pandemic. But at the moment the government has no plans to restore the restrictions. Among the weak stocks were the values of the Japanese airlines ANA Holdings (-0.94% to 2,414 yen) and Japan Airlines (-1.75% to 2,242 yen) which suffered in the face of the new wave of Covid-19 in Japan and from the weak prospects of US companies.
Focus on manufacturing and services indices
Investors are focused in the morning on the release of the preliminary PMI (purchasing managers) indices for the euro area for July in both the manufacturing and services sectors. Markit Pmi indices on manufacturing and services are also scheduled for the afternoon in the US. In the American quarterly calendar it is the day of Twitter.
The reaction to Draghi’s fall and the decisions of the ECB
The day after the end of the Draghi government, the market took a hit but probably less than expected. Piazza Affari lost 0.7% above the lows and the Dax 0.3% The session was very volatile, a heavy morning with even 2% drops, then in the afternoon came the decision of the ECB which raised rates by 50 basis points, therefore beyond expectations, also announcing the anti-spread shield, the Tpi. The instrument enters into force in the presence of a disorderly market trend and is subject to some conditionalities. Particularly noted the spread, which closed up around 238 basis points, for most of the day it was close to 250 even after the announcement of the ECB shield. In Piazza Affari, reductions of over 4% for many banks, post offices and telecom. Some industrialists go against the trend, starting with Amplifon and Diasorin.
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