Monday 9.30am GMT
Overview
Italy’s stock market and much of the country’s banking sector has recovered from opening losses as investors refine their response to the No vote in the country’s referendum on constitutional reform that led to the resignation of Prime Minister Matteo Renzi.
Nonetheless, the yield on the country’s benchmark sovereign debt yield remains higher as investors continue to sell Italian government bonds. Italy’s 10-year government debt yields, which climb when investors sell the debt, are up 8 basis points at 1.98 per cent, having been up by as many as 13bp earlier.
The euro remains lower against the dollar, but is some way off its weakest point for the session.
The euro touched lows last seen in March 2015 after the vote — down 1.6 per cent at $1.0503 which brings political uncertainty back to the shared-currency area, centred on its third-biggest economy. Investors are, however, no strangers to the prospect of turbulence within the eurozone and as the session developed, its currency traded down 0.4 per cent at $1.0634.
“There is no reason to panic,” said Peter Schaffrik, chief European macro strategist at RBC Capital Markets.
“There are quite a few steps that stand between the current status quo and the market’s main fear of a referendum on euro membership. However, the probability of that coming to pass surely must have increased.”
Milan’s FTSE Mib is now up overall on the day, by 0.4 per cent, having been down 1.9 per cent in early trade, led lower by its banks. While some of the biggest names in the sector are still falling — including UniCredit, down 3.4 per cent — others are rising. Among them, Banca Monte dei Paschi di Siena is up 0.7 per cent.
Wider European stock markets are also more poised. Frankfurt’s Xetra Dax 30 is up 1.9 per cent, with only two stocks registering losses: Commerzbank and Deutsche Bank. while London’s FTSE 100 is flat. The region-wide FTSE Euro Stoxx 600 is up 0.6 per cent. Markets across Asia are weaker on Monday following a weak lead from Wall Street on Friday.
Hot topic
Given the shock of both the UK vote for Brexit and Mr Trump’s victory in the US presidential election, investors are more on guard for political upsets in the eurozone that have the potential to raise questions over European Monetary Union. The Italian referendum is followed by French presidential elections in the spring in which Marine Le Pen, leader of the far-right National Front, is expected to make it through to the final round.
What to watch
US stock markets could once again provide a high point: futures trading is pointing to a fresh record for the S&P 500. Wall Street’s most watched equities gauge, which also sets the tone for much of the world’s share trading, is pointing toward a fresh record in opening New York trade. The futures market is expecting a rise of 0.6 per cent.
Commodities
Brent crude has surpassed the high point that it reached after Opec’s agreement last week to limit supply, which took it just under $54.
The international oil marker is up 0.6 per cent on Monday to $54.77, taking it back to levels last seen in July 2015.
Nymex WTI is up 0.7 per cent at $52.04,
Equities
The resilience on Germany’s stock market is being driven by carmakers and industrial stocks. BASF is the top single gainer, up 3 per cent.
In London, resource stocks are higher and UK banks are also rising. Barclays is up 2.5 per cent and is the best single gainer on the FTSE 100, which is up 0.8 per cent overall.
Major benchmarks across Asia are in negative territory, with their European peers expected to follow. Japan’s Topix is down 0.8 per cent, while Australia’s S&P/ASX 200 closed 0.8 per cent lower.
A new trading link between Hong Kong and the nearby city of Shenzhen went live this morning but the markets were lower. Hong Kong’s Hang Seng was down 0.3 per cent, while China’s Shanghai Composite was down 1.2 per cent and the technology-focused Shenzhen Composite was off 0.6 per cent.
Forex
There is a wider trend for a stronger dollar, with the index tracking the world’s reserve currency up 0.5 per cent at 101.220. The pound is down 0.2 per cent against the dollar at $1.2698. Against the euro, the pound is 0.3 per cent stronger at £0.8353.
The big mover among Asian currencies is the New Zealand dollar, down 0.5 per cent. Already weak in early trade, the kiwi suffered a further knock after John Key, the country’s prime minister, announced unexpectedly that he was stepping down.
Additional reporting by Richard Blackden
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