News out of Italy that the country has strongly rejected the proposed constitutional reforms - which has subsequently led to PM Renzi to follow through on his promise to resign - saw a soft open for European stock markets and the single currency. However this weakness has swiftly dissipated and there is now swathe of green across stock markets with the FTSE 100 rising by a little shy of 1%. The pound is also enjoying a bright start to the week and is higher against all its major peers expect for the Euro.
Resounding “No” from italy
The referendum held yesterday in Italy was essentially an attempt to grant the government more powers in passing laws, but was given a big thumbs down from the public and threatens the incumbent party's chances of reelection. PM Renzi had stated before polling day that an unfavourable result would lead to him standing down - and due to the clear margin of victory shown in exit polls, shortly after voting ended he proved good to his word and offered his resignation in a public address. The speed at which the markets have recovered suggests that maybe this wasn’t as big a deal as it was initially made out and whilst it could open the door for the anti-Europe party the Five Star Movement at the next general election, the current state of political gridlock which has frustrated Mr. Renzi will serve as a potential roadblock to any aspirations of successfully holding a referendum on EU membership.
Austria reject far-right candidate
Whilst it didn’t garner quite as much attention in the press, the Italians weren’t the only ones heading to the ballot box over the weekend with Austria electing Van Der Bellen as their new president. Whilst the post itself is largely ceremonial in Austria, the poll was widely seen as a sign of how well populist candidates might do elsewhere in Europe. Mr. Van der Bellen called the result a vote for a pro-European, Austria based on freedom, equality and solidarity and the near tenfold increase in his winning margin which was a rerun of May’s election shows an impressive level of growth when some had questioned whether he would even win.
Banking stock lead the way higher
Several of the best-performing stocks on the FTSE 100 this morning come from the banking sector with Barclays (LON:BARC), RBS (LON:RBS) and Lloyds (LON:LLOY) all moving firmly higher. Italian banks have endured a torrid time of late and their resilience to the outcome of Sunday’s referendum has been taken as a big vote of confidence amongst their UK equivalents. The biggest laggards come from shares that are sensitive to the price of precious metals with Fresnillo (LON:FRES) and Randgold Resources (LON:RRS) both being heavily offered as the price of Gold bullion sinks lower. The initial reaction to the weekend’s developments saw Gold spike as futures contracts opened for trade last night, but the elevated levels of risk aversion - which causes Gold to rise due to its status as a perceived as a safe haven - quickly subsided as a sense of calm returned to the markets.