Eq: Dev ex-US


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


In what comes as a very ironic potential twist of fate, the decision over how, if, and when to do Brexit could come down to the European Court of Justice. The UK Supreme Court has already ruled that Parliament will have to vote to enact Article 50, or the measure which officially starts Brexit, but a key facet to the enactment and following negotiations may need to be resolved by the European courts. That would be to determine whether Article 50 is revocable once enacted, meaning can Brexit actually be reversed. Numerous other aspects of Brexit may also have to be decided in European courts.

FINSUM: The fact that the UK will have to resort to European Courts on a number of matters regarding Brexit is almost macabre, but it also highlights how deeply intertwined the UK is with Europe and how messy it will be to disentangle the two.

Source: Financial Times


The US and UK have both had revolutionary-level votes this year and both had huge impacts on financial markets and have changed the shape of geopolitics. Our advice to investors is to get ready for another such vote. Italy is preparing for a December 4th referendum on a constitutional reform that would give more power to the PM. However, the vote has turned into a de facto referendum on Euro membership, as PM Renzi has vowed to resign if he loses the vote, which would clear the way for the far right party to sweep to power and call another referendum on the Euro. The polls are running very close, with Renzi just behind as of last week and a quarter of voters still undecided.

FINSUM: If Renzi loses this vote, we think the market’s reaction could be very significant, as it would bring about the first major panic over the viability of the Euro since the European Debt Crisis. We have no insight into how things might go in Italy, but populism and rejection of the status quo seem to be global, so we expect Renzi will likely lose.

Source: Wall Street Journal

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