Italian Law & Eur Affect the MIB
Today, the European market started lower, strongly influenced by the rise in global bond yields. This has affected confidence ahead of the release of long-awaited inflation data at the end of the week. Yesterday Wall Street showed some weakness coupled with the Asian market also closing in losses, partly under pressure from rising US Treasury yields as inflation concerns are influencing talk of keeping interest rates higher for longer than desired and expected by analysts. This kept the 10-year bond near its lowest level in recent weeks.
German consumer prices released yesterday rose more than the market forecast in May, so this ensures that attention will be even more focused on the eurozone tomorrow. Expectations are for eurozone inflation to rise by 2.5% year-on-year in May, up from 2.4% in April, which would prompt the ECB to react by cutting rates next week, but this moment of uncertainty is making investors and speculators alike nervous.
During the first hour of European trading, the market has turned around recovering those lost positions and Europe is currently in “thinking green”. This may be related to the fact that the ECB may not have to worry about the dollar for a while and may concentrate on finding a path to stability as they believe the EURUSD will remain sideways as a carry-on-trade currency, which was a very strong focus of concern as a 1% drop in the euro against the dollar according to Swiss Re means about 12 basis points of inflation in the euro zone, hence this could be felt as a risk to European prices. With a defensive dollar, this risk has softened. The May meeting has greatly tempered the waters of a Jerome Powel looking to cut interest rates.
Focusing our attention on the Milan Stock Exchange, already on the 27th the Italian parliament has supported a bill to shore up its stock exchange trying to attract investors and trying to compensate for the losses of important companies that were listed on it due to other markets and acquisitions that have taken place. This plan, although it may seem counterproductive and discourage foreign investments, allows companies to issue shares that increase up to 10 times the voting rights of old investors, while Italy seeks to curb relocations to the Netherlands, which seems to be the country of choice for companies that make it easier for established shareholders to maintain tight control over companies. This provision has infuriated large funds that are pro: “one share, one vote”, which prevents the concentration of power in the hands of a few. Although there are lawyers arguing about the ambiguity of the bill, the government has committed to review a possible law amendment by the end of the year.
Looking at the chart, since the publication of the amendment, the index has lost -2.65% until today's opening. The European trend has meant that today the FTSE MIB (Ticker AT: ITA40) has recovered 0.90%.
What is clear is that if this uncertainty continues to be sustained, it is possible that an oversold situation will exist throughout the summer until this law is corrected.
In a one-hour chart, at this moment, the price formation has a mono-bell disposition with a checkpoint price around 34,846 points.
Currently the current range is between 34,876.19 and 33,988.40 so it could be said that it is exactly in the middle of the channel. The RSI is currently around 47% so there is hardly any imbalance. It is very possible that we will see the index fluctuating around that price average for a season.
Ion Jauregui - ActivTrades Analyst
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The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
German consumer prices released yesterday rose more than the market forecast in May, so this ensures that attention will be even more focused on the eurozone tomorrow. Expectations are for eurozone inflation to rise by 2.5% year-on-year in May, up from 2.4% in April, which would prompt the ECB to react by cutting rates next week, but this moment of uncertainty is making investors and speculators alike nervous.
During the first hour of European trading, the market has turned around recovering those lost positions and Europe is currently in “thinking green”. This may be related to the fact that the ECB may not have to worry about the dollar for a while and may concentrate on finding a path to stability as they believe the EURUSD will remain sideways as a carry-on-trade currency, which was a very strong focus of concern as a 1% drop in the euro against the dollar according to Swiss Re means about 12 basis points of inflation in the euro zone, hence this could be felt as a risk to European prices. With a defensive dollar, this risk has softened. The May meeting has greatly tempered the waters of a Jerome Powel looking to cut interest rates.
Focusing our attention on the Milan Stock Exchange, already on the 27th the Italian parliament has supported a bill to shore up its stock exchange trying to attract investors and trying to compensate for the losses of important companies that were listed on it due to other markets and acquisitions that have taken place. This plan, although it may seem counterproductive and discourage foreign investments, allows companies to issue shares that increase up to 10 times the voting rights of old investors, while Italy seeks to curb relocations to the Netherlands, which seems to be the country of choice for companies that make it easier for established shareholders to maintain tight control over companies. This provision has infuriated large funds that are pro: “one share, one vote”, which prevents the concentration of power in the hands of a few. Although there are lawyers arguing about the ambiguity of the bill, the government has committed to review a possible law amendment by the end of the year.
Looking at the chart, since the publication of the amendment, the index has lost -2.65% until today's opening. The European trend has meant that today the FTSE MIB (Ticker AT: ITA40) has recovered 0.90%.
What is clear is that if this uncertainty continues to be sustained, it is possible that an oversold situation will exist throughout the summer until this law is corrected.
In a one-hour chart, at this moment, the price formation has a mono-bell disposition with a checkpoint price around 34,846 points.
Currently the current range is between 34,876.19 and 33,988.40 so it could be said that it is exactly in the middle of the channel. The RSI is currently around 47% so there is hardly any imbalance. It is very possible that we will see the index fluctuating around that price average for a season.
Ion Jauregui - ActivTrades Analyst
*******************************************************************************************
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
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