European stock markets closed the short week mostly weak on Thursday due to the Easter holidays, with investors evaluating the latest indications on the possibility of restoring energy transport through the Strait of Hormuz. Iran said on Thursday it was drawing up a protocol with Oman for cross-strait traffic, while Britain said around 40 countries were discussing joint action to reopen the Strait of Hormuz and prevent Iran from holding “the global economy hostage”.
US President Trump, however, issued new threats against Iranian infrastructure in a bid to put pressure on Tehran during negotiations, a day after his promise to continue the war sparked economic and global market turmoil.
The tension in the energy market shows no sign of decreasing, also because Trump’s speech to the nation, in which he promised to hit Iran hard, offered no concrete signs of a possible end to the conflict with Iran, although the occupant of the White House threatened that the United States is now close to achieving its objectives. And so Brent crude prices stand at around $109 per barrel, at levels close to the historic highs recorded during the entire conflict.
On the macroeconomic front, inflationary pressures still show no signs of accelerating: according to preliminary data for March, inflation in the Eurozone rose to 2.5% (from the previous 1.9%), a figure slightly lower than expected. This acceleration was driven exclusively by energy prices, while inflationary pressures in the food, services and consumer goods sectors slowed. The so-called “core” inflation – which excludes energy and food components – stood at 2.3% (from the previous 2.4%). Core inflation could accelerate in the coming months, as the increase in production costs tends to be reflected in final prices with a certain delay.
The main indices
In the European stock market scenario, Frankfurt closed on Thursday with a decline of 0.56%, Paris was also weak, leaving 0.24% on the ground, while London made progress, recording an increase of 0.69%.
No significant changes at the close for the Milanese stock exchange, with the FTSE MIB reaching the values of the day before at 45,625 points (-0.20%), as well as for the FTSE Italia All-Share, which closed below the levels of the day before at 47,957 points (-0.20%). The FTSE Italia Mid Cap is below parity, showing a decline of 0.22%; as well as the FTSE Italia Star, slightly negative (-0.41%).
The headlines on Piazza Affari
At the top of the ranking of the most important stocks in Milan, we find ENI (+4.27%), Stellantis (+4.08%), Saipem (+3.50%) and Inwit (+2.49%). The worst performances, however, were recorded on STMicroelectronics, which closed at -2.82%. Also under pressure are Banca MPS (-2.77%), Unicredit (-2.54%) and Mediobanca (-2.51%).
At the top among Italian mid-cap stocks, Alerion Clean Power (+6.30%), ERG (+3.40%), Carel Industries (+3.26%) and D’Amico (+2.91%). The strongest sales, however, hit BFF Bank, which ended trading at -9.64%. Letter on NewPrinces (-7.47%). Banca Ifis (-2.70%) and Credem (-2.27%) also fell.
Middle East and the European response
Speaking at the XVI MAECI-Bank of Italy Conference at the Farnesina, the Governor of the Bank of Italy Fabio Panetta outlined a worrying picture of the economic consequences of the conflict in Iran, warning that the ongoing energy shock could be more serious and long-lasting than initially estimated.
The conflict is causing “unprecedented disruptions to global energy supply chains,” with shipping traffic in the Strait of Hormuz “almost zero” since the start of hostilities. Panetta underlined that even in the event of a rapid cessation of hostilities, the return to production normality would be slow, with technical times required to restore extraction capacity and the energy supply chain. The increases mainly affect refined products essential for industry and agriculture.
The answer, for Panetta, necessarily passes through European integration: “Full strategic autonomy requires the completion of European integration.” Europe has the necessary human, technological and productive resources, but “the challenge today is above all political: to transform this potential into action, quickly and consistently.” We need effective decision-making mechanisms and a fully integrated continental financial system, capable of attracting foreign capital and strengthening the international role of the euro.
What to expect from the ECB
Given the current environment, analysts now expect the ECB to hike interest rates twice by 25 basis points this year, in April and June respectively, while the bond market is pricing in a maximum of three hikes. On Thursday evening, Francois Villeroy de Galhau, governor of the Banque de France and member of the ECB’s Governing Council, said that “it is far too early to predict a timeline for interest rate increases,” but that “of course, it is very likely that the next change in key interest rates will be upwards.”
Next week, the March Fed meeting minutes will likely receive less attention than usual, due to the rapidly evolving war situation. Key March inflation data for the United States will also be released.
