European markets wake up after Renzi's resignation
The markets are facing a complicated situation but this time they seem more prepared
European markets are again facing a new complicated political situation on Monday, although, for now, the falls are moderating. The Ibex starts the day with cuts of 0.9%. Italian Prime Minister Matteo Renzi has announced his resignation following the crushing victory of the "no" (59% of the vote) in the referendum for constitutional reform that was held on Sunday in Italy.
For once the polls hit this year and, as expected, won 'no' in Italy. Italians have decided that they don't want to end the 'perfect bicameralism' of their political system and Congress and Senate will continue having the same power. This was one of the changes that the reforms promoted by Renzi intended to establish. What was not expected is that the participation, of almost 70% (69.30%), was so high (the highest in history in a voting of these characteristics). Barclays experts warned last week that if Matteo Renzi was to register a share of more than 40%, he would resign and the President of the Republic, Sergio Matterella, would accept his resignation and appoint another prime minister, probably Pier Padoan, currently Minister of Economy and Finance, or Pietro Grasso, President of the Senate.
Mario Draghi will speak on Thursday. Investors hope that market falls will be limited and that the President of ECB will "neutralize" the negative impact of what happened in Italy. Barclays experts said last week that this negative impact would last only a day that would go from minus (strong falls) to more (it would end up flat). Link Securities experts warned that, should Renzi's irreversible resignation occur, "both equity markets, leading banks, fixed income and the euro will correct strongly."