Equity markets, especially the American ones, continue to show surprising strength. Is there a risk of excess that can hold nasty surprises or can the ongoing trend continue?
The US markets show surprising strength, showing even more clearly the split between finance and the real economy.
Markets are currently discounting the Federal Reserve’s ultra-expansive measures and the fiscal stimulus being carried out by the Trump administration.
There have also been two recent factors supporting Wall Street: positive expectations of the reopening of global economic activities and the recovery of oil prices which has brought new enthusiasm to the oil sector.
It is possible that in the medium / short term the markets may continue to show a recovery, but the risks of new relapses still remain high.
The main ones include tensions on political and commercial relations between the United States and China, a return of the coronavirus emergency with a second wave of infections and a possible failure to agree on production cuts at the next OPEC + meetings.
How do you judge the latest ECB maneuvers?
The latest moves are very positive. The decisions of the ECB to commit to increase the PEPP plan by an additional € 600 billion sent, in our opinion, a concrete signal to the markets.
The Frankfurt Institute is ready to buy assets from countries in difficulty due to the coronavirus emergency until June 2021, confirming that the ECB is ready to defend the financial stability of the Eurozone at any cost.
We believe that the maneuver was formally decided for the change in inflation expectations (inflation 2022 revised downwards from 1.5% to 1.3%), but also for the liquidity problems of many countries, which will see the funds of the Next Generation only in 2021.
With the increase in the PEPP plan, the ECB guarantees control over the spreads and returns of the Eurozone and decreases the cost that some countries, especially Italy, will have to face in order to finance themselves through the issue of bonds.
At Piazza Affari, the Ftse Mib is making great strides, so much so that it has returned to the values left behind at the end of the first decade of the market. Do you still see rises in the short term?
Italy and its banking system can greatly benefit from the economic policies promoted by the ECB and the European Commission.
The ECB has expanded its government bond purchase contingency plan and the European Commission is ready to launch the Next Generation fund.
We believe that in the medium / short term we may see further increases in Piazza Affari.
The FTSE Mib index has room to climb up to the 20,600 area, covering the gap that opened on 9 March and towards the more ambitious target of the 22 thousand points.
To confirm these growth expectations, however, the Ftse Mib will overcome the strategic resistance at 20,000 points.
Unicredit and Intesa Sanpaolo are taking advantage of the good recovery of the market. What strategies can you suggest for both?
The maneuver of the ECB that allowed the BTP-Bund spread to fall below 180 basis points has brought enthusiasm to the Italian banking sector.
For Intesa Sanpaolo we believe that a peremptory victory above 1.75 euros can lay the foundations for an extension in the direction of 1.85 euros before and possibly even up to 1.96 euros.
Negative indications for Intesa Sanpaolo will instead come in the event of descents below 1.60 euros, a prelude to a possible drop towards 1.49 euros and 1.32 euros, the last useful foothold for the latter to avoid more ruinous falls.
Unicredit can also give continuity to the bullish movement, but it will have to go beyond the resistance positioned at 9 euros.
A victory over this obstacle could be an indication for an ascent to the 9.60 euro area.
Between the two big banks, however, our preference falls on Intesa Sanpaolo which in our opinion has better fundamentals than those of Unicredit.