Stock markets: a lull following the turmoil over US yields. Milan closes flat, Wall Street up
Gold has been trading at a three-month high following the US Treasury’s massive debt buyback programme. Bitcoin is also soaring, whilst oil prices remain high, with Brent crude trading at over $94 a barrel
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(Il Sole 24 Ore Radiocor) - The European stock markets closed significantly higher on the final trading day of a difficult week, though the Milan Stock Exchange lagged behind (unchanged) despite the latest developments in the banking sector. MPS (-1.3%) was among the worst performers on the FTSE MIB, alongside Mediobanca (-1.8%): the market proved sceptical, deeming the dual public offer for BPM (-0.4%) and Banca Generali (-2.05%) to be ‘complex and uncertain’. A move devised by CEO Luigi Lovaglio as a shield against the takeover bid by Intesa (-0.7%), which is aligned with Unipol (+0.9%) regarding the Siena-based bank.
Elsewhere, the markets are enjoying a breather on the US debt and yields front, following the record highs of recent days. Treasury Secretary Scott Bessent said yesterday that the government might increase its Treasury bond buybacks, following the doubling of such purchases last Wednesday. However, “the idea that Washington has opted for long-term debt buybacks rather than adjusting its fiscal trajectory and slowing the growth of debt will probably only serve to reinforce the trend towards de-dollarisation”, argues Ipek Ozkardeskaya of Swissquote. This trend is fuelling the dual rally in gold and bitcoin, which is on course for its best week in over two years. Tensions between Washington and Tehran are also fuelling caution, with the United States threatening to tighten sanctions against Iran further.
A volatile week for bonds and crude oil; Milan down 2%
The week following 15 August was a turbulent one for the markets, characterised by a resurgence of risk aversion and, in Italia, dominated by the latest chapter in the ‘Risiko’ saga. Investors first had to contend with the Trump administration’s economic offensive against Iran, which ruled out an imminent reopening of the Strait of Hormuz, pushing crude oil back to its highest levels in the last month.
This follows the surge in US Treasuries, after the record yields reached on Wednesday for the 30-year bond (5.33 per cent) and a partial respite following the US Treasury’s intervention on buybacks. In the equity market, doubts are resurfacing intermittently regarding tech valuations and the scale of investment required to sustain the rally. Just today, Samsung’s massive share buyback has given the sector a new lease of life. Across the Atlantic, moreover, Moderna (+135%) has returned to investors’ radar following data on its melanoma vaccine, whilst gold and bitcoin have benefited from the search for alternatives to the dollar and renewed tensions over US debt.
Milan thus closed down 2 per cent, Paris down 2.6 per cent, Frankfurt down 0.7 per cent, and Madrid down 1.1 per cent. The picture is also bleak on Wall Street: in the eighth session (which is not yet over), the S&P 500 is down 0.9 per cent, the Dow Jones down 1.5 per cent and the Nasdaq down 1.6 per cent. On the Milan Stock Exchange, Ferrari (+4.3 per cent) is leading the way, followed by Eni (+3.7 per cent) and Saipem (+3.2 per cent), which are rising in line with crude oil prices. Bringing up the rear were ST (-10.7%), Moncler (-7%) and Inwit (-6.2%). But it has been a week of corporate takeovers. Following the takeover bid launched in June by Intesa (-0.8%) in alliance with Unipol (-2%), MPS (-2.8%) laid its cards on the table, with a dual takeover bid for BPM (-1.9%) and Banca Generali (-0.3%) that was met with a cool reception from market participants. In Europe, pressure on the tech sector is also evident in the Euro Stoxx 50: Infineon -9.3% and ASML -4.7%.
