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The FTSE MIB index came under intense pressure this week as sentiment on Italian stocks eased. The index, which tracks the biggest Italian companies, has dropped in the past six straight days. Most of these gains came on Tuesday as concerns about the banking sector escalated.
Italy windfall taxes
The FTSE MIB index slumped harder than other European indices on Tuesday. This decline happened as investors dumped stocks of Italian banks after the country’s parliament approved a giant windfall tax.
Italian banks will be forced to pay a 40% tax on their net interest income this year. In a separate statement to assuage the market, the government said that the tax will be capped at 0.1% of its risky-weighted assets.
According to the FT, which cited a person with knowledge about the issue said that the response was meant to partially calm the market. Despite the backtrack, Italian banks will still need to pay over 1.8 billion in extra funds to the government.
As a result, banks were the worst-performing companies in the FTSE MIB index. Bper Banca and BCA MPS shares dropped by more than 10% while Fineco Bank, Banco Bpm, Intesa Sanpaolo, UniCredit, and Banca Generali slipped by over 5%.
Italian banks have reported a sharp increase in interest income following the decision by the European Central Bank (ECB) to hike interest rates. Politicians argue that these banks have not increased interest paid to customers in line with this jump.
These bank stocks will likely remain under pressure on Wednesday following Moody’s decision to downgrade some leading American banks. Some of the banks that were downgraded were M&T Financial, Pinnacle Financial, and Webster Financial. Moody’s also placed banks like Truist, BNY, and Northern Trust on review.
Historically, the FTSE MIB index tends to underperform following a down day in Wall Street. Indices like the Dow Jones, S&P 500, and Nasdaq 100 declined by more than 15 on Tuesday.
The index wil also react to several important earnings from some of the biggest European companies. Some of the most notable ones are Generali, Unipo Gruppo, and Deutsche Telekom.
FTSE MIB index forecast
Italian stocks have done well this year. The FTSE MIB index soared to a high of €29,730 in July. Recently, however, the index has pulled back and dropped below the 50-day moving average. It remains slightly above the 100-day moving average.
The FTSE 100 index is also slightly above the lower side of the ascending channel. Therefore, the index will likely retreat and then resume the bullish trend as buyers target the key resistance at €29,000. A move below the lower side of the ascending channel will point to more weakness.
The post FTSE MIB pressured by Italy bank windfall taxes: buy the dip? appeared first on Invezz.
