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Milan stocks end higher as FCA and the banking sector gain traction

by Cheo Condina

European stock prices closed mostly lower after the European Central Bank decided to leave interest rates unchanged and sounded a cautious note on inflation.

The ECB left the interest rate on the main refinancing operations at 0.00% and said that it expects key ECB interest rates “to remain at present or lower levels for an extended period of time, and well past the horizon of the net asset purchases.”

ECB President Mario Draghi said underlying eurozone inflation remains subdued, despite a recent increase due to energy prices. Draghi added that the conditions for the transmission of the ECB's monetary policy have improved but this “does not mean we can relax.”
Investors remained on the sidelines ahead of President-elect Donald Trump's inauguration, scheduled for today. Investors also digested comments yesterday by US Federal Reserve chair Janet Yellen, who said that the US central bank will raise rates a few times a year through 2019.

A rebound in banking stocks lifted Milan shares, which outperformed the region. The London FTSE 100 closed down 0.54% at 7,208.44 points, the Frankfurt DAX closed down 0.02% at 11,596.89 points, the Paris CAC 40 dipped 0.25% to 4,841.14 points, in Milan the FTSE MIB rose to 0.69% at 19,490.96 points and in Madrid the IBEX 35 ended down 0.08% at 9,379.10 points.

In Milan, UBI Bank and Bper—the two banks involved in the affair of four “good banks” that were rescued at the end of 2015— remained in the spotlight.

Ubi Banca stock hasn't slowed a run-up that started in late November. Yesterday, the a day after a deal was signed for the acquisition of three of the four good banks, it rose more than 7%. It has surged 80% since its low in late November and 30% from the start of the year.
On Wednesday evening, Ubi Banca announced that it had signed an agreement to acquire 100% of Nuova Banca delle Marche, Nuova Banca dell'Etruria e del Lazio and Nuova Cassa di Risparmio di Chieti, the three banks “rescued” at the end of 2015. The deal is expected to close in the first half of 2017 after the sale of bad credit for €2.2 billion, a €400 million capital increase for Ubi Banca and approval by the ECB.

In the broadcasting sector, after trading lower all morning, Mediaset ended the session up 1.57% the day after it presented its strategic plan though 2020 to investors in London. Management anticipated bringing the company's loss-making pay-TV business to break-even (a move applauded by analysts) but also provided estimates of higher market share in advertising that some brokers dubbed overly ambitious. The major takeaway was that Mediaset anticipates €468 million in additional operating profit by 2020 from five specific measures: €200 million from restructuring Premium; €123 million from broader organizational changes; €90 million from advertising; €45 million from content optimization; and €10 million from radio.

In the manufacturing sector, FCA rose 4.81% extending gains for the week after the stock was pummeled last week after the US authorities charged the car manufacturer with using software on its trucks to evade emissions standards on about 104,000 vehicles.