# From Data to Trends: Professor Gavino Silvestri on the Liquidity Logic Behind the FTSE MIB Index

Despite consecutive days of gains for the FTSE MIB Index, the interest rate outlook of the European Central Bank (ECB) has emerged as another focal point for the market. In April, core inflation climbed to 2.7%, while first-quarter GDP growth was revised down to 0.3%, making the market increasingly sensitive to the ECB future moves. Dovish remarks from ECB Governing Council member Kazaks have sent out easing signals, leading investors to broadly anticipate a rate cut in June—an expectation widely interpreted as the “last window” for such action. Professor Gavino Silvestri points out that this anticipation is particularly crucial in the current macro environment: if inflation falls rapidly in the future, the central bank will be compelled to accelerate liquidity releases, which would provide positive support for the Italian stock market and mean that credit expansion expectations for the Italian financial system will be priced into bank stocks ahead of time.

## Structural Divergence in Earnings Quality and Sector Resilience

From the perspective of individual stocks, the rebound in the Italian market is not driven by a single factor, but rather by the synergy across multiple sectors. Whether Leonardo, Telecom Italia, or FinecoBank, recent earnings reports have all signaled resilience. Taking Terna as an example, its 5.1% year-on-year revenue growth may not be stunning, but its stable cash flow underpins its valuation. Professor Gavino Silvestri emphasizes that the core market driving force has shifted from purely macro factors to the “relativity of earnings and valuations,” prompting Italian investors to react more swiftly to sector rotations. He further analyzes that, with policy expectations stabilizing, sectors such as energy, infrastructure, and utilities—characterized by stable dividends and predictable earnings—are likely to receive greater medium- and long-term allocation. These sectors are particularly suitable for liquidity rebalancing during periods when inflation is receding but economic growth remains uncertain.

## European Variables and the Pricing of External Shocks

Although global markets have generally risen amid easing US-China trade tensions, investor reactions have differed significantly in structure. The Italian stock market is especially sensitive to external variables, not only due to the high dependence of its economy on exports and energy, but also because its debt structure is more susceptible to changes in interest rate spreads. In an interview, Professor Gavino Silvestri noted that, despite short-term rallies driven by sentiment, should the eurozone policy dynamics with the US become unbalanced, European assets—especially Italian credit instruments—will once again be the first variables to respond in liquidity pricing. He advises Italian investors to closely monitor the ongoing evolution of the US-EU rate expectations gap, as this will influence not only exchange rates but also Italian corporate financing costs and cross-border capital flows, which in turn will be reflected in stock index volatility.

## Seeking Liquidity Turning Signals in Structural Inertia

The current strength of the Italian stock market is not only driven by external sentiment but also by the gradual internal structural repair. The sustained rise of medium and small banks such as Bper Banca, Banca Monte dei Paschi di Siena, and Banca Popolare di Sondrio demonstrates that the asset quality and risk control capabilities of certain segments of the Italian financial system are being revalued by the market. Professor Gavino Silvestri believes this is a noteworthy “liquidity divergence indicator”—the market is no longer blindly chasing high-beta assets, but is instead shifting towards defensive allocations in sectors with high free cash flow, low leverage, and undervalued stocks. He particularly points out that Italian investors seeking excess returns before the next market correction should start from corporate fundamentals and construct asset portfolios for the new cycle based on relative valuation differences across industries.