Day dedicated to sales for Eurolists, held back by the restrictive tone of the ECB. In Piazza Affari, the Ftse Mib ends down by 3.45% in points, with decreases above all on Finecobank (-6.35%), Amplifon (-5.5%), Nexi (-5.2%) and Poste Italiane (-5.2%), while Leonardo resists on parity.
The Btp-Bund spread soars to 205 basis points, with the yield on the Italian 10-year bond rising by almost 30 bp to 4.14%, after the Eurotower meeting. Among the currencies, the euro/dollar travels in the 1.065 area.
The ECB raised rates by 50 basis points, as expected, signaling that the cost of borrowing will still have to increase significantly at a steady pace as inflation remains too high. The updated Eurotower economic projections forecast GDP growth of 3.4% in 2022 (revised by +3.1%), +0.5% in 2023 (cut from previous +0.9%), +1 .9% in 2024 (stable) and +1.8% in 2025. Average inflation in 2022 is estimated at 8.4% (from 8.1%) to then drop to 6.3% in 2023 (from 5.5%), to 3.4% in 2024 (from 2.3%) and to 2.3% in 2025.
Christine Lagarde, president of the institute, said that there will be further hikes of 50bp. Furthermore, the euro area economy is expected to contract in the current quarter and in the next.
As for the quantitative tightening, from March 2023, APP asset purchases will be reduced by 15 billion per month until the end of the second quarter, with the subsequent pace determined over time.
Meanwhile, Wall Street is also traveling in negative territory with losses of between 2% and 3% for the main indices, in the aftermath of the Federal Reserve meeting which raised rates by 50 basis points, as expected, bringing them within the range 4.25-4.5%.
Chairman Jerome Powell stressed that there is still a long way to go to get inflation under control and dismissed the hypothesis of a cut in the cost of borrowing next year, paving the way for another half-percentage point tweak at the meeting in February.
Furthermore, projections by FOMC officials have revealed a terminal rate in 2023 in the range of 5.0-5.25%, a level higher than previously indicated and market estimates.
Finally, the Bank of England also raised rates by 50 basis points, signaling further hikes.