Moody’s: cuts of 100 bps in 2024. For S&P no more than two without Fed
Moody’s Ratings expects the ECB to cut key rates by around 100 basis points this year in light of the modest prospects for economic growth. The rate cut by the ECB «will support the loan growth of euro area banks after months of weak lending activity – says Fabio Ianno, VP-Senior Credit Officer at Moody’s Ratings -. Lower rates will also provide relief to vulnerable borrowers, reducing banks’ asset risk.”
For S&P it is “unlikely that the ECB will make more than two rate cuts alone before the Fed starts this year”, also considering the different trends in inflation in Europe and the USA. Sylvain Broyer, chief EMEA economist at S&P Global Ratings, said: «The ECB’s decision to raise rates after the Fed and cut them first indicates different inflationary dynamics across the Atlantic,” says Broyer. Having said this, continues S&P’s EMEA chief economist, “it seems unlikely that the ECB will make more than two rate cuts alone before the Fed starts this year”. Furthermore, «the Fed’s rate cuts are expected to continue until 2026, well beyond the completion of the cuts by the ECB». Assuming that inflation aligns with targets and that growth reaches potential by the middle of next year, as expected, «it is likely that the ECB limits rate cuts to no more than one per quarter until the third quarter of 2025, with a minimum deposit rate of 2.5%”.
Iveco takes off in Milan, banks recover after the ECB
The removal of the probability of a second rate cut in July pushes the banking sector with Bper (+2.7%) and Unicredit (+2.5%) among the best stocks in the Ftse Mib. Finecobank is also in the spotlight (+3.1%) after the May collection numbers were better than expected, while Banca Mediolanum is doing well but below the highs (+1%) End of session at the top of the Iveco price list (+3.7%) after the return of rumors according to which Leonardo is preparing an offer for the purchase of Iveco Defense Vehicles, a hypothesis appreciated by analysts but which received no comment from the companies. At the bottom of the list were Poste (-1.2%), even if the Minister of Economy, Giancarlo Giorgetti, slowed down the timing of the placement of a share on the market, Nexi (-1.7%) and Erg (-1, 8%).
Euro/dollar tests 1.09, then falls back
Brief flare-up above 1.09 for the euro/dollar after the ECB and after the US macro data, with the single currency standing at 1.088 (1.0866 the day before). The euro/yen is at 169.84 (169.69) and the dollar/yen is at 156.02 (156.17). The feeling that the dollar could fall «is strong – underlined by ActivTrades -, demonstrating that perhaps the market is starting to focus on the economic recovery of those who will first reduce the cost of money”, continue the analysts.
Oil and gas are rising again
Oil, together with raw materials, is rising again, with a “general return of risk appetite driving the trend, with the covering of short positions especially on Brent and also on base metals”, underline the MPS analysts. «This is a technical rebound – they say from ActivTrades – after prices had collapsed to lows of the last four months”. July WTI stands at 74.7 dollars a barrel (+0.85%), August Brent at 79.11 dollars (+0.9%). Ttf gas also rises after the drop the day before to 33.6 euros per megawatt hour, while it remains strong They.
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