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Political Uncertainty Added to Italian Woes

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Italy sank into political limbo after Prime Minister Matteo Renzi announced his resignation on the back of a crushing defeat over his constitutional referendum, triggering renewed financial turbulence for Europe.

The premier was due to hand in his resignation to President Sergio Mattarella on Monday afternoon, after Renzi’s proposal to rein in the power of the senate was rejected in a referendum by 60 percent to 40 percent, with almost all votes counted. Renzi signaled that he won’t stay on to help stabilize a caretaker administration.

The euro fell to a 20-month low, while stock index futures and Italian bonds slumped as the prospect of mounting political risk buffeted financial markets. Much of the focus is on Banca Monte dei Paschi di Siena SpA, which is in the middle of a 5 billion-euro ($5.3 billion) capital raising. Its stock has fallen 83 percent this year and a third of its loan book has soured.

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
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