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Encouraging data on GDP and youth unemployment push Milan stocks higher

by Corrado Poggi

In a day that saw European stock prices closed lower across the board retreating from a two-day rally after hitting on Wednesday three-week highs, Piazza Affari bucked the trend rising almost 1% on positive news from the macroeconomic front and thanks to a strong performance by banking shares.

At a European level, investors seemed to cautiously await the outcome of the constitutional referendum due to take place on Sunday in Italy and of the presidential election in Austria. Providing support were oil prices that were boosted by the agreement by OPEC member states to slash production to 32.5 million barrels per day from the current 33.64 million.

In Milan investors welcomed a report from statistics bureau ISTAT according to which Italy’s gross domestic product in the third quarter of 2016 was up 0.3% on the previous quarter and up 1.0% on the year earlier. The quarter-on-quarter figure was in line with preliminary indications while the year-on-year GDP increase was above a preliminary indication of a 0.9% increase.

Also Italy’s unemployment rate in October stood at 11.6%, down 0.1 percentage point from the previous month while the number of unemployed fell by 37,000, or 1.2%, compared to the previous month. A positive signal came from the data on unemployment rate for youth, or those between the ages of 15 and 24 which fell 0.4 percentage point in October to 36.4%. However, the rate of inactive youth also rose by 0.4 percentage point to while the employment rate of 15-24 year old slipped 0.1 point.

Finally the differential between yields on 10-year Italian government bonds and their German counterparts fell to 1.68 percentage points from 1.72 points at the close Wednesday.
At the end of the session, the FTSE  Mib showed a 0.99% gain while Frankfurt was down 1% and Paris 0.39%. London also closed in the red shedding 0.45%.

In the financial sector, shares of Banca Popolare dell’Emilia Romagna (BPER) and Credito Valtellinese (6.14%) were higher amid renewed talk of a possible tie-up between the two Italian lenders.

On Wednesday Creval general manager Mauro Selvetti said the bank “is open to evaluating everything when it comes to M&A, and thus also to the BPER hypothesis.” Selvetti noted that a deal of this sort appears necessary to widen the bank’s client base and boost profitability. The Creval general manager added that nothing concrete is underway with any potential deal partner.

Meanwhile, traders point to talk that BPER could present an offer for Cariferrara, one of the four small Italian banks bailed out last year. UBI Banca is expected to acquire the remaining three. In the energy sector, shares of Italian gas transport group Snam lost 3.56% after the Greek government announced it was shelving plans to sell gas grid operator Desfa to Azerbaijan’s state-owned oil company Socar, with which Snam was expected to ally to buy into the Greek group.

According to an initial agreement, Socar was to buy 66% of Desfa for €400 million. In order to comply with European Commission competition concerns, the expected deal evolved into one in which Socar would take 49% of Desfa and Snam would take 17%.

According to analysts at ICBPI, the deal likely fell through due to economic reasons, as the Greek energy and environment ministry explained that Socar and Snam had wanted to pay for Desfa in tranches.

Finally shares of Italian upscale car group Ferrari ended down 0.58% after the Chinese finance ministry announced it was imposing a tax on the purchase of luxury autos. The new Chinese tax applies to cars costing over 1.3 million yuan (€177,000).

According to one Italian broker, however, demand for cars in the over €150,000 range is “not very elastic,” meaning that the tax is expected to have a very limited effect on luxury car sales.

The Chinese finance ministry said the tax is meant to encourage the purchase of autos with less fuel consumption while observers add that it is also in line with the government’s anti-corruption campaign.