Strong losses for global financial markets. Starting from Piazza Affari. One hour after the end of trading, the Ftse Mib index fell 3.13%. On the same line as Wall Street, with the Nasdaq losing three percentage points. The uncertainty on European stock exchanges is linked to concerns about an acceleration on the rate hike by the ECB, and to fears for inflation, + 10.8% in September for Germany (harmonized HICP index) and the economic situation , in marked deterioration. The latest news reinforces the idea that inflation will remain higher in Europe and that the Fed will still be very aggressive in terms of monetary policy in the US. Meanwhile, eyes are focused on the decisions that the European Central Bank will take: Goldman Sachs said he hypothesized the ECB rates to reach 2.75%, from 2.25 estimated so far.
The news coming from the Nord Stream 1 gas pipeline also weighs on the general climate. Concern is high about the trend of economic activity. In Milan, stocks in the automotive sector (-3.3%) and retail sales (-3%) are losing ground in particular. Banks are also bad (-2%). No sector index is rising. On Wall Street, all sectors are in negative territory, and it looks like an extremely heavy session.
The government bonds sector is also accusing the effects of the renewed nervousness on Italy, with the yield of the ten-year BTP above 4.7% while the spread is in the area of 245 basis points. Sales concern all European fixed income with the ten-year Bund which yesterday reached 2.25%, the highest since 2011. But the most battered are the British government bonds, in what is becoming a crisis of confidence on the whole system Uk. Here, too, the 10-year Gilt is at its highest since 2011. The 30-year, on the other hand, broke through 5%, a level it hadn’t seen since 2002.
Meanwhile, this morning the auctions of 5 and 10-year Treasury bonds have reached the highest levels of the last ten years. The Treasury raised the maximum amount of 6.25 billion euros spread over two 5- and 10-year BTPs and a CCTEU. In particular, the seventh tranche of the BTP 1 December 2027 coupon 2.65%, placed for 2.75 billion, was assigned at the rate of 4.12%, the highest since August 2012, compared to 3.09% of the placement at the end of the August.
«The geopolitical and economic framework remains very complex for all the main economies, albeit for different reasons – writes Matteo Ramenghi, Chief Investment Officer UBS Wm Italy – this morning. Europe is confronted with an even more complex situation: inflation is high in Italy too and the central bank has started a cycle of rate hikes, but the rise in prices mainly derives from imports of raw materials, especially energy. The situation is difficult to predict because it depends on the war in Ukraine, sanctions and indirect consequences (..). Without Russian gas, many economic sectors will have to reduce their level of activity, with implications for employment, and consequently the European economy could slide into recession between the end of this year and the beginning of next ». The expert continues: «Europe is certainly the area most exposed to these tensions and we therefore expect a further depreciation of the euro against the dollar and the franc. The pound could also show further weakness. For the same reasons we expect rising energy prices ».