The Milan stock exchange and the uncertainty of tariffs: the list assesses companies' profits
The Milan stock exchange questions the impact of duties on corporate profits, while the Piazza Affari index shows a partial recovery
by Morya Longo
3' min read
3' min read
From Liberation Day on 2 April, when Trump announced tariffs to the whole world, to 7 April the Milan stock exchange lost almost 15%. A performance comparable to that of the times of the Russian invasion of Ukraine (-15%), to that of the post-Brexit days (-16%) and not far from that of the attack on the Twin Towers (-24%). Then a recovery started, so much so that the Piazza Affari index now 'only' loses 6.43% since the evening of 2 April. So today, after the rebound and in the midst of the Easter break, it is fair to ask a few questions: is the Milan price list (after the fall and the partial recovery) discounting in its prices the fall in the possible profits of companies?
In short: at current prices, is the Milan Stock Exchange too pessimistic, still optimistic or correctly priced? Can the rebound seen this week continue? According to the calculations of Alberto Villa, head of equity research at Intermonte, it can be said that today the Italian stock exchange incorporates the predictable base scenario in its prices. It is therefore correctly priced. But given the high uncertainty, this is no guarantee of anything.
Multiples of Milan
.According to Intermonte's estimates, the trade war launched by Trump will bring down profits in Piazza Affari: 'We expect,' explains Villa, 'that the profits of companies listed in Milan could be revised downwards by 5-10%'. Stock market valuations have already fallen: while before the duties the ratio of share prices to company profits was around 12 times at Piazza Affari, it has now dropped to 10.5 times. 'These new valuations already incorporate the cut in earnings estimates,' notes Villa.
Therefore, the current quotations in Piazza Affari could be balanced now. But only theoretically: the downward revision of profits by 5-10% is calculated on the basis of the current scenario in which the White House demonstrates a willingness to negotiate with other countries and find satisfactory agreements for everyone. If the scenario worsens, then everything could change. But since no one can know this, it is impossible to make any real predictions.
The impact on profits
.Moreover, the downward revision of profits by 5-10% is only an average. 'Like Trilussa's chicken,' comments Villa. Because the impact of the tariff war is not uniform across all sectors. 'Some sectors were already suffering before 2 April,' notes Villa. 'Some industrial sectors, such as automotive for example. But also automotive components, industrials or energy, which were penalised by the drop in oil prices. Here the trade war has an important effect and comes on top of previous suffering.
