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IBERIAN DAILY 15 JULY (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: FERROVIAL, IBERDROLA.

Markets fall due to Italy and the poor start to the earnings season
The new political crisis in Italy after the 5-Star Movement avoided to back M. Draghi in a vote in the Senate added to the disappointing results posted by the main US banks at the start of the 3Q’22 earnings season. Thus, the European stock markets fell once again, with the MIB standing out with a -4% decline. Within the Euro STOXX, all sectors with the exception of Travel&Leisure, saw losses, led by Energy and Banks. On the macro side, in Italy, the resignation of Draghi has been rejected by the President of the Republic, S. Mattarella, who has instructed him to address Parliament next 20 Jul, Wednesday, to assess the political situation. Draghi’s Govt., even without the 5-SM, has large parliamentary majority, and the key will be whether the Liga continues to support him. Meanwhile, the pressure on peripheral risk premiums and the euro will continue. In the US, weekly jobless claims increased for the second consecutive week. From the Fed, C. Waller and J. Bullard defended rate hikes of 75bps. In Brazil, the Finance Ministry raised its growth forecast to 2% (from 1.5% prev.) even though May’s activity index speeded up less than expected. In China, the 2Q’22 GDP disappointed, growing a 0.4% less than expected, dragged down by the lockdowns. However, industrial output and retail sales showed signs of a rally in June, coinciding with lower restrictions. In 2Q’22 business results, JP Morgan and Morgan Stanley came in worse, whereas First Republic Bank better than expected.
What we expect for today
European stock markets would see a bullish opening following the stabilisation of the US market. Currently, S&P futures are up +0.3% (the S&P 500 ended +0.6% higher vs. the European closing bell). Volatility in the US dropped (VIX 26.40). Asian markets are mixed (China’s CSI 300 -0.4% and Japan’s Nikkei +0.6%).
Today we will learn in the US July’s Manufacturing Empire. June’s retail sales, industrial output, June’s installed capacity and May’s business inventories. In US business results, Bank of NY, BlackRock, US Bancorp and Citigroup, among others, will release their earnings.