Commenting on Sunday’s Italian referendum vote, Paul Jackson, Head of Research at ETF provider Source, predicts a ‘no’ vote.
Jackson says: “The blackout period ahead of the Italian referendum on Sunday (4th December) means the market will get no more indication of where popular opinion is heading. It is doubtful whether it would have much value considering how many people were still undecided, but a ‘No’ vote seems likely in our view.
“Italian government bonds and equities seem to be positioning for that. Ten-year yields have doubled from 1.05 per cent – their low in September – and Italian banks are down 12 per cent in the past month. However, European equities seem more sanguine about it, and if we are right, they can sell-off, while Bunds would be an obvious ‘safe haven’.
“Even if the Italian government survives a ‘No’ vote, French elections could be the next focal point for markets and those worrying about the survival of the EU. Considering all this uncertainty, it is all the more surprising how weak sovereign debt markets have been since the US presidential elections. In fact, the only country where benchmark bond yields dropped is Greece.”
WisdomTree has also commented on the referendum, with Viktor Nossek, director of research, saying: “The 4 December referendum on Italy’s constitutional reform will decide the long term growth trajectory of Italy’s economy. If the Italians vote yes, bills on labour to pensions to industrial policy will more easily be passed speeding up the ambitious reform agenda of current Prime Minister Renzi and future governments. Domestic-demand growth will be reinvigorated. If the Italians vote no, it is status quo for the economy: moribund growth, weighted down by a slow-responding and ineffective government; high unemployment; and high debt, inciting populist rhetoric. Eurosceptic leadership will threaten the European project, with opportunities for anti-establishment parties to form a new government.”