Stock markets: US interest rates and Merz’s budget measures reignite Europe. In Milan (+1.6%), defence shares surge

(Il Sole 24 Ore Radiocor) – A weaker-than-expected US labour market pushes back the prospect of monetary tightening by the Fed, boosts share prices, weakens the dollar and encourages buying of gold. But Europe is also being buoyed by the massive German tax cut plan for the middle class worth 10 billion euros, presented by German Chancellor Friedrich Merz as part of a plan to revive the German economy. Against this backdrop, European indices closed the session sharply higher, following the previous day’s pause, with the Frankfurt DAX hitting new all-time highs (25,655 points; a record was also set for Madrid’s Ibex at 19,799 points). The FTSE MIB also closed strongly but below its intraday high of 52,716 points: up 1.6% at 52,428 points. Adding to the picture is the fall in oil prices, which dropped to their lowest levels in the last four months (Brent around $70 a barrel, WTI just over $67) alongside ‘positive’ progress in talks between the United States and Iran, according to a statement by the spokesperson for the Qatari Ministry of Foreign Affairs.

Wall Street is trading mixed, following a weaker-than-expected jobs report and the resumption of the sell-off in semiconductor stocks. The June report showed an increase of 57,000 jobs last month, a figure below the 115,000 forecast by economists polled by Dow Jones. The unemployment rate, however, fell to 4.2 per cent; economists had predicted that the rate would remain at 4.3 per cent. Analysts are now betting that the Federal Reserve will refrain from raising interest rates under these circumstances. In the equity market, chip stocks are down: Nvidia Corp, Intel, Qualcomm. Record high for the Dow Jones, driven by Apple and Amgen ,Johnson & Johnson and Walmart.

Buying in UniCredit on the Milan Stock Exchange on the eve of the end of the supplementary acceptance period for the public offer for Commerzbank. Although the bank will not announce the final results of the offer until 8 July at the earliest, the market is beginning to consider the possible scenarios. In a recent report, Mediobanca analysts emphasise that the acceptances already announced put control of Commerzbank within UniCredit’s reach. Following the close of the public offer, experts estimate it will take 3–6 months to obtain all the necessary authorisations, during which time the Italian bank will not be able to purchase any further shares. Once the ECB has given the go-ahead to exceed the 30 per cent threshold, UniCredit will be free to buy shares on the market without this giving rise to any obligations towards other shareholders. Alternatively, Piazza Gae Aulenti may acquire shares off-market or through other derivatives; in this case, if the transaction takes place within 12 months of the closure of the public offer, it will have to compensate in cash for any price difference solely to those Commerzbank shareholders who had tendered their shares in the offer. Finally, once 12 months have elapsed, UniCredit may also launch a new offer without any specific obligations.

On the stock market, the defence sector is leading the charge: in Milan, Fincantieri (+7.72%) and Leonardo (+7%) are leading the way. According to Gabriel Debach, market analyst at eToro, ‘the trigger comes from Ankara, where the US ambassador to NATO, Matthew Whitaker, has floated the idea of a two-tier Atlantic Alliance. Those who invest more in defence could reap tangible benefits, such as more time with leaders and priority in the procurement and supply of armaments.” The St index is down (-0.8%), along with the entire tech sector.

A trading session with very limited rises in Eurozone government bond yields, as the US employment report spurred buying of US Treasuries, pushing yields lower. The impact on this side of the Atlantic meant that the yield on the 10-year BTp, after rising to 3.72% earlier in the morning, fell back to this morning’s levels of 3.68%, whilst still closing above the previous day’s 3.66%. A similar movement in the German Bund of the same maturity led to a narrowing of the spread to 78 basis points, down from 79 on Wednesday evening.