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Milan stocks end slightly lower as banks and FCA weigh on sentiment

by Flavia Carletti

A weak performance in banking stocks weighed on Milan’s stock market yesterday, which closed slightly lower at the end of a little-changed session across Europe. In Milan, the FTSE Mib closed down 0.17% and the FTSE All Share was 0.12% lower while in Paris the Cac40 slipped 0.5%. Frankfurt’s Dax index closed up 0.34% and in London the Ftse100 finished 0.18% higher.

During the day, some calm returned to the secondary government bond market in Italy, after the yield difference between 10-year Italian BTPs and their Germany Bund equivalents rose back beyond 200 points on Monday. Yesterday the difference narrowed slightly, closing at 198 basis points against 201 at the opening of trade. The yield ended at 2.34% against 2.39% at the closing of the previous session.

Among blue chips, the session saw selling especially of lenders such as Banco BPM (falling 5.98% to €2.39). Weakness was also seen in BPER (-3.46% to €5.02), Mediobanca (-2.11% to €7.645), Intesa Sanpaolo (-1.92% to €2.142) while developments are awaited on the situation with Generali (-0.55% to €14.55) and its potential tie-up with Intesa.

FCA slipped 2.91% to €9.68, after French investigators referred the car maker for possible prosecution due to abnormal emissions, while the company is trying to reach an agreement to resolve a related situation in Germany. According to media reports, Italy and Germany are expected to shortly reach a settlement, which would involve FCA agreeing to modify the control units of its diesel engines to improve the measurement of emissions under real driving conditions. The deal is expected to be ratified shortly by the European Union.
Despite expectations of an imminent accord, investors are remaining cautious in the face of possible new negative surprises on the so-called “dieselgate” front.

Analysts at Banca Akros have nonetheless confirmed their ’buy’ rating on FCA stock, adding that the ratification of a deal on emissions readings “would be positive and not discounted.” Banca Akros surmises that the auto maker could reach a similar deal with US authorities, agreeing to install more sophisticated control units to measure emissions.

ICBPI analysts also have a ’buy’ rating on FCA shares, noting that a settlement could put an end to the volatility that has struck the stock ever since Germany levelled its first accusations regarding emissions against the auto maker last spring.

UniCredit shares closed up 0.49% at €12.27, while its preference shares (+9.66% at €44.94) were halted due to excessive volatility for a large part of the session, when they were up more than 9%. UniCredit rights were up 0.09%. The lender launched its €13 billion capital increase on Monday, the biggest ever in Italian stock market history, and in the first session it lost 6.87% while its rights shed 18.85%, amounting to a drop of 12.8% compared to Friday for the shares-rights combination.