Europe midday: Stocks under pressure as Italian referendum looms
European stocks remained weaker by midday as excitement over the OPEC deal tapered off and investors switched their focus to the upcoming Italian referendum and the nonfarm payrolls report later in the day.
The benchmark Stoxx Europe 600 index fell 1.05% with France’s CAC 40 and Germany’s DAX were 1.30% and 0.93% lower respectively.
Meanwhile, Italy’s FTSE MIB was 1.1% weaker ahead of Sunday’s referendum on constitutional reform. Italians will be asked to decide whether to accept a package of constitutional reforms put forward by centre-left Prime Minister Matteo Renzi, who has said he would resign if the proposals are rejected.
Oil prices cooled off following the OPEC-fuelled rally. West Texas Intermediate was down 1.4% to $50.35 a barrel while Brent crude was 1.6% lower at $53.05.
Accendo Markets Mike van Dulken said: “It's all about European politics with Sunday's Italian referendum likely impacting both domestic and Eurozone banks come Monday. To add fuel to the fire, we creep towards OPEC's meeting with Russia to confirm production cut cooperation and an ECB policy update on Thursday that could see QE extended by 6 months.”
Markets appear to be positioned for a ‘no’ vote in Italy’s referendum on constitutional reform on Sunday, HSBC said, with banks there underperforming their European peers by 9% and the European stock market by 11% over the past month.
The bank reckons a ‘yes’ outcome would prompt a 5-10% rally in the Italian equity market in the short term, while a ‘no’ vote might trigger a 5% to 10% correction if Prime Minister Matteo Renzi remains and a 10% to 20% correction if he goes.
On the data front, Eurozone producer prices rose more than expected in October, according to the latest figures from Eurostat.
Producer prices increased 0.8% from September compared to expectations for a 0.2% jump.
In corporate news, Berkeley Group rallied after it reported a better-than-expected increase in first half earnings and revenue, boosted by continued strength in the London market.
GlaxoSmithKline edged lower after it said the Japanese government has approved its Relvar Ellipta drug for the use in patients with chronic bronchitis and pulmonary emphysema.
US nonfarm payrolls and the unemployment rate are at 1330 GMT.
Think Markets chief market analyst Naeem Aslam said: “The mother of all data, the US NFP, will be released today and under the lights of the Italian referendum it has lost some of its shine today. The question is if the data is going to be strong enough to make the tone of the FOMC committee hawkish given that the dollar strength has already created some concerns among the members. It is this anxiety which may keep the Fed to fade some of their hawkish tone despite the fact that we may see another 3-4 rate hikes next year.”