Eq: Dev ex-US

(London)

For those of you who might not have noticed—and one could easily be forgiven for it—Britain’s largest stock index, the FTSE 100, is about to mark its best run in 33 years. It is poised to gain 11 days in a row. On the surface this seems like a headscratcher considering all the bad news and gloom surrounding the country’s Brexit from the EU. However, stock investors there love the devaluation of Sterling, which boosts earnings and makes British goods more affordable for overseas buyers. Take AstraZeneca for instance, the company’s largest drug maker, which has seen its shares rise in 16 of the last 20 sessions.


FINSUM: This shows that a currency fall can overcome almost any obstacle in the minds of stock investors.

Source: Financial Times

(Rome)

In a stunningly lopsided result given pre-referendum polls, Italians voted resoundingly yesterday to reject the constitutional reforms put forth by Matteo Renzi. The vote went nearly 60% against the reforms, and subsequently Renzi has resigned from power. Markets, curiously, did not react strongly to the result, with the Euro initially dropping but then rising. The explanation for the muted response is that traders finally saw this populist event coming, with one commentator saying “After Brexit, it took three days for markets to shake it off, with Trump it took three hours, with Italy it took three minutes”.


FINSUM: Italian banks got hurt pretty bad, but outside of that things have been okay. The big question now is what happens next in Italy. Will we see that far right party grab power and call a referendum on the Euro?

Source: Bloomberg

(Rome)

The future of Europe’s banks are hanging on by the thinnest of threads right now. Rescue plans for Monte Dei Paschi, and the fate of the rest of Italy’s embattled banks seems to be entirely contingent on this weekend’s referendum (on Sunday). Worse yet, the whole continent’s banks could be undermined if the referendum goes against Renzi, as populism would be shown to be dominant in Europe. This would likely mean the status quo political system, which has kept the banks afloat, could be washed away by the rising tide of the far-right. The big banks to watch this weekend seem to be Monte Dei Paschi, UniCredit, Deutsche Bank, and Banco Popular Espanol.


FINSUM: If this vote goes the way of recent plebiscites, it is very hard to forecast where that will leave banks, and investors will likely hate that uncertainty.

Source: Wall Street Journal

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