The UK stock market has begun the week on the back foot as investors are becoming jittery at the potential fallout of Sunday’s Italian referendum. The pound is also lower on the day and depreciating against all its major peers at the time of writing.
Politics to drive the markets?
This coming weekend sees Italians head to the ballot box to vote on a constitutional reform act which Prime Minister Matteo Renzi has said will lead to his resignation if the no vote prevails. On a busy week for data releases, the recurring theme of 2016 with politics trumping economics could continue with the Italian referendum garnering more attention than Wednesday’s OPEC meeting or Friday’s US jobs report. Whilst the vote isn’t necessarily a game changer in itself, its implications could well be - not just with a potential resignation from Mr. Renzi on the cards if the “no” side come out on top - but another victory for the anti-establishment could ultimately be seen as another development that threatens the future of the European Union.
Banks weigh on the FTSE
In the short-term, the immediate fallout from the referendum could be felt most fiercely in the banking sector with fears for the solvency of several Italian banks having a contagion effect in London. RBS (LON:RBS), Barclays (LON:BARC) and Lloyds Banking Group (LON:LLOY) are all firmly in the red this morning and their selling has contributed to the wider FTSE 100 trading lower by 15 points. Precious metals have begun the week brightly with Silver and Gold both moving higher and looking to recoup some of their recent losses since the US elections. Their rise is apparent in the list of gainers for the leading UK index with Polymetal International and Fresnillo (LON:FRES) both higher by more than 2% so far.