Europe midday: Italian stocks stabilise after initial referendum shock
Italian stocks pared losses at midday as investors took Italian PM Matteo Renzi’s resignation in their stride, while the euro clawed back some ground against the dollar and European shares rose.
Italy’s FTSE MIB was down 0.43% after briefly turning higher earlier, as analysts suggested the outcome of the vote was largely priced in.
IG market analyst Joshua Mahony said: “European markets have been surprisingly resilient this morning, as initial fears of another eurozone crisis have been largely brushed aside. Sharp depreciation in the euro and European indices have been swiftly reversed, bearing more than a passing resemblance to the UK referendum and US election results.
"Fears over the future for Italian banks will persist, with recapitalisation plans thrown into doubt after Renzi’s exit. However, this morning’s recovery is a clear sign that market perception is that despite causing uncertainty, this result is unlikely to spark a major crisis for the banks.”
Banks were still on the back foot as investors worried that political instability would make the task of sorting out non-performing loan issues even more difficult. The FTSE Italia All-Share Bank index was down 0.48%.
Monte dei Paschi di Siena was 2.31% weaker amid concerns about risks to the troubled lender’s €5bn cash call, which was due to start this week. Banco Popolare di Milano and Banco Popolare were sharply lower, as was UniCredit, which was reported to have started exclusive talks with France’s Amundi to sell its asset management arm Pioneer Investments. Amundi gained 3.33% on the news.
At the same time, the yield on Italy’s 10-year government bond rose 6.8% to 2.031%. Yields move inversely to prices.
In the rest of Europe, the benchmark Stoxx Europe 600 was 0.72% higher with France’s CAC 40 and Germany’s DAX up 1.11% and 1.50% respectively.
Meanwhile, oil prices were up, with the West Texas intermediate and Brent crude 1% higher at $52.21 and $55.10 per barrel.
On the data front, Markit’s final eurozone composite output index came in at 53.9 in November, down from the flash estimate of 54.1 but up from October’s 53.3.
This marked the best reading since December 2015, with the strongest rates of increases registered by Ireland and Spain.
Chris Williamson, chief business economist at IHS Markit, said: “The Eurozone PMI indicated faster economic growth in November. The improvement is enough to signal an acceleration of GDP growth to 0.4% in the fourth quarter.”
Meanwhile retail sales in the 19 countries that share the euro rose to 1.1% from September, beating expectations of a 0.9% increase according to the latest figures from Eurostat. On the year, sales were up 2.4%, compared to a 1% jump in September.
Pantheon Macroeconomics said: “Across sectors, a 2.3% month-to-month jump in non-food sales was the main driver of the October rise, offsetting a decline in spending on petrol. Food sales also rose modestly. It is too early to say anything convincing about Q4 as a whole, but our base case is that retail sales will increase 0.4% quarter-on-quarter, marginally higher than the 0.3% increase in Q3.”
In currency markets, the euro had gained back some ground after falling to a 20-month low in Asian trade, trading up 0.34% against the dollar at 1.0698.
In corporate news, Royal Bank of Scotland rose as it reached a settlement with three of the five shareholder groups who said they were misled over the bank’s £12bn fundraising in 2008.
Hungarian low cost airline Wizz Air gained as it reported 19% in growth in passenger numbers for November, as the load factor ticked higher.