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London / AFP
European equities pushed higher on Tuesday as investors shrugged off Italy’s referendum result that was already priced into markets, dealers said, as lower oil prices weighed on US stocks. Traders have registered little reaction to Italian Prime Minister Matteo Renzi’s vote defeat Sunday and subsequent resignation, in the wake of recent shock votes in Britain and the United States.
2016 has already witnessed a wave of anti-establishment populism, which saw Britain vote for its EU exit and the United States elect Donald Trump. “If neither Brexit nor a vision of Donald Trump in the White House could convince traders to dump shares, it’s hardly surprising a ‘no’ vote in the Italian referendum failed to dent investor confidence,†said Lee Wild, head of equity strategy at stockbroker Interactive Investor.
The euro held above $1.07, having crashed
on Monday to a 20-month low at $1.0506.
Eurozone indices were also lifted by confirmation that the eurozone economy grew by 0.3 percent in the third quarter. London stocks briefly stumbled over jitters surrounding an ongoing legal challenge to Britain’s June 23 referendum decision.
By mid-afternoon trading, Paris, Frankfurt and London shares were all slightly higher. Milan’s benchmark FTSE MIB index jumped by 1.9 percent continuing the previous day’s run despite Renzi losing the referendum on constitutional reform.
POLITICAL RISKS
“Considering the FTSE MIB has bucked the overall up trend in stock markets and has fallen 22 percent so far this year, you could argue that an adverse outcome from the referendum was already priced in,†noted City Index analyst Kathleen Brooks.
“Markets would be wise not to get too
complacent about political risks.†Traders also took the news in their stride partly because Renzi’s departure will be delayed by a final task, passing a budget, in a move expected by the end of the week.
Britain’s Supreme Court began an historic hearing Monday to decide whether parliament has to approve the government’s Brexit negotiations, in a highly-charged case that could delay the country’s EU exit. The High Court sent shockwaves through markets last month when it ruled that the government did not have the executive power alone to invoke Article 50 and kick off the two-year Brexit process.
Attention is shifting to the Federal Reserve’s expected interest rate rise next week, with traders hoping it will give some indication of its plans for 2017 as US President-elect Trump embarks on a big-spending programme that will likely fan inflation.
On Wall Street, petroleum-linked shares pulled back in opening trading on lower oil prices, as the Dow retreated slightly from Monday’s record close.