UniCredit is­sue lifts banks be­fore Fed meet­ing

Kuwait Times - - BUSINESS -

Global shares edged up yes­ter­day, helped by gains in banks af­ter Italy’s largest lender un­veiled a 13 bil­lion-euro share is­sue, while the dol­lar held steady be­fore a Fed­eral Re­serve meet­ing ex­pected to de­liver higher in­ter­est rates. Wall Street also looked set to rise, with in­dex fu­tures about 0.3 per­cent higher. UniCredit launched Italy’s big­gest share is­sue to clean up its bal­ance sheet and boost prof­itabil­ity, the lat­est move to strengthen the Ital­ian bank­ing sec­tor, which has been cloud­ing the out­look for Euro­pean stocks.

UniCredit shares rose 8.3 per­cent and an in­dex of Ital­ian banks added 3 per­cent as the pan-Euro­pean STOXX 600 share in­dex gained 0.8 per­cent. “It’s a hard medicine to swal­low, but UniCredit’s move to raise bil­lions of eu­ros and a re­struc­tur­ing pro­gram would put the bank in a much bet­ter shape,” said Koen De Leus, chief econ­o­mist at BNP Paribas For­tis.

Mar­kets were oth­er­wise fo­cused on the two­day Fed meet­ing, which is al­most cer­tain to con­clude with only the sec­ond rise in US in­ter­est rates since the global fi­nan­cial cri­sis. While a hike of 25 ba­sis points in the Fed’s tar­get range of 0.25-0.50 per­cent is priced in, in­vestors will be ex­am­in­ing the Fed’s state­ment and eco­nomic fore­casts for any signs of how the cen­tral bank thinks Trump’s elec­tion af­fects the out­look for growth and in­fla­tion.

“The big ques­tion is, what sort of pace can we ex­pect from the Fed for next year?” said Ka­neo Ogino, di­rec­tor at for­eign ex­change re­search firm Global-info Co in Tokyo. The dol­lar was all but flat against a bas­ket of ma­jor cur­ren­cies. The euro fell 0.2 per­cent to $1.0612 and the yen fell 0.2 per­cent to 115.24 per dol­lar.

US 10-year Trea­sury yields, which popped above 2.5 per­cent on Mon­day for the first time since Oc­to­ber 2014, fell 3 ba­sis points yes­ter­day to 2.45 per­cent. “We think the meet­ing may be a cat­a­lyst for peo­ple to take some profit on long dol­lar po­si­tions,” Bar­clays an­a­lyst Hamish Pep­per said.

Ster­ling bucked the trend, ris­ing 0.3 per­cent to $1.2715, buoyed by com­ments from fi­nance min­is­ter Philip Ham­mond that Bri­tain should have a tran­si­tion pe­riod to smooth its exit from the Euro­pean Union. Data showed UK con­sumer prices rose 1.2 per­cent year-on-year last month, their big­gest rise since Oc­to­ber 2014. MSCI’s broad­est in­dex of Asia-Pa­cific shares out­side Ja­pan edged up 0.2 per­cent, while Ja­pan’s Nikkei stock in­dex shrugged off losses as the yen pulled off its highs and ended 0.5 per­cent higher.

Global shares, as mea­sured by MSCI’s all-coun­try world in­dex , rose 0.3 per­cent but held be­low Mon­day’s 16-month high, touched as crude oil prices surged af­ter the Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries and non-OPEC pro­duc­ers reached their first deal since 2001 to re­duce out­put.

Italy’s ef­forts to clean up its banks - the Trea­sury said on Mon­day it was ready to bail out Monte dei Paschi di Siena if nec­es­sary - pushed yields on its gov­ern­ment debt lower and saw the pre­mium the coun­try pays to bor­row, com­pared with Ger­many, squeezed to its nar­row­est in more than a month.

Ital­ian 10-year yields fell 10 ba­sis points to 1.91 per­cent while Ger­man equiv­a­lents fell 5 bps to 0.36 per­cent. This fol­lowed new Prime Min­is­ter Paolo Gen­tiloni an­nounc­ing an al­most un­changed cabi­net on Mon­day. “The mar­kets ap­pear to be tak­ing the de­vel­op­ments in the bank­ing sec­tor quite pos­i­tively and the cabi­net cho­sen by Gen­tiloni has re­as­sured in­vestors,” DZ Bank strate­gist Chris­tian Lenk said.

Asian mar­kets mostly fell yes­ter­day as at­ten­tion turns to this week’s much-an­tic­i­pated Fed­eral Re­serve meet­ing, while an­a­lysts said the re­cent Trump-fu­elled rally may have been overblown.

“With a rate hike at this week’s (meet­ing) fully priced and given the strong rally in the dol­lar, we are likely see­ing some par­ing of po­si­tions head­ing into the rate de­ci­sion,” Khoon Goh, head of re­gional re­search at Aus­tralia & New Zealand Bank­ing Group in Sin­ga­pore, told Bloomberg News.

“Mar­ket par­tic­i­pants are also re­assess­ing whether the Trump rally has got­ten a bit ahead of it­self.” Hong Kong edged up 0.1 per­cent and Shang­hai also ended 0.1 per­cent higher, with gains lim­ited de­spite a bet­ter-than-ex­pected read on Chi­nese fac­tory out­put and re­tail sales.

“The fig­ures are good but the mar­ket sen­ti­ment re­mains cau­tious af­ter a big drop yes­ter­day,” Li­nus Yip, a Hong Kong­based strate­gist at First Shang­hai Se­cu­ri­ties, said. Shang­hai sank 2.5 per­cent on Mon­day. Seoul put on 0.4 per­cent but Syd­ney lost 0.3 per­cent while Sin­ga­pore, Welling­ton and Manila were also all down. — Agen­cies

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