Monday, December 5, 2016

Why Italy is not contested on the markets – the Echoes

Some of them had promised an earthquake in the event of a victory of the ” no ” in the referendum. A shock of a nature to call into question the very existence of the euro zone, bank failures in series etc

at the end, the markets accuse penalty kick. How can we explain this reaction very moderate in the wake of the huge defeat of Matteo Renzi pushed for the resignation ?

1 – the victory of The ” no ” has been widely anticipated

Unlike the u.s. elections, or Brexit, the result of the referendum was widely expected. “The markets have, however, been disappointed by the larger difference than expected between the two camps (60 % for the no) “, says ING bank. This is probably what explains the sudden stall of 1.59 % of the euro against the dollar immediately after the announcement of the results. In the morning, the decline of the euro has eased : the single currency yields about 0.3% only.

2 – Italy from sinking into populism

ING bank also recalls that ” the vote in favour of the non-does not imply a substantial change in government (to political parties anti-estblishment) or early elections in the immediate future. “The populist party” Movement 5 Stars ” is not at the gates of power : according to Natixis, the formation of a government technique is the most likely scenario (70%). Matteo Renzi would be replaced by Enrico Letta, or Pier Carlo Padoan, both from the Democratic Party.

Natixis considers the likelihood of early elections in February 2017 and only 10% : “there is no doubt of the outcome the worst. It is also the least likely as it would require a dissolution immediate of parliament by Matarella. However, not knowing what electoral law will be applied in the case of a new election, it is unlikely that the latter would take such a risk before the decision of the Constitutional Court in January “, explains the bank, who thinks that it would be more likely (20%) that Renzi remains Prime minister.

3 – ECB ready to fly to the rescue of Italy

The monetary institute has left to say last week that it may temporarily buy more Treasury notes in Italian in the case where the outcome of the referendum would push up the costs of funding from the State. A very effective way – the european central bank with enormous power over the financial markets – to calm the ardor of some of the speculators : “we do not oppose the central bank,” say always the financial.

In fact, the rate a 10-year-old has made only 10 basis points and passes above the 2% mark. In spite of a small voltage, the spread – that is to say, the difference between the rates of Italian and German – is still lower than its levels in November. Finally, the rating agency Standard & Poor’s believes that the referendum result has no impact in the immediate future on the note of the Italian debt.

4 – The more complex situation of the banks

The fate of the Italian banks remains more uncertain. “The whole issue in a first time is how investors will judge the capacity of resilience of Italian banks. If it appears that the latter fail to raise capital in the current context in Italy, a vicious circle can develop and contaminate the other european stock exchanges “, believe analysts at Aurel BGC.

A feeling shared by Pimco : “the outcome of the referendum makes the recapitalisation of Monte Dei Paschi more complicated, with a negative effect that could spread to the whole Italian market and in particular UniCredit, which seeks to carry out a capital increase. “

In Exchange, the banks make a yo-yo : after you have opened decrease of 3.63%, the index of the 9 main Italian facilities moved up to take around 1%. Around noon, he gives, nevertheless, 2.23 percent. What are the popular banks that show the worst performance (around -5%).


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