1. Italy rocked by referendum: Investors are on high alert and markets are volatile after Italian Prime Minister Matteo Renzi said early Monday that he would resign following defeat in a referendum on constitutional reform. Italy now appears headed for a period of political and financial turmoil.
The most immediate concern is a potential banking crisis. Some of Italy’s banks are drowning in bad debt — a legacy of years of economic stagnation — and urgently need to raise new funds.
Traders initially hit the sell button Monday. Italy’s main stock market index dropped by about 2%, dragged down by slumping bank stocks, but then rallied and is now in positive territory.
The prospect of instability in the eurozone’s third biggest economy also pushed down the euro versus all major global currencies, but it too has steadied.
2. Global market overview: Investors are betting the fallout on Europe will be limited, and that the European Central Bank could announce new measures to support the economy as early as Thursday.
Stock markets across the region are faring well.
Germany’s DAX is the standout performer with a 1.6% rise. Even shares in the German banks Deutsche Bank and Commerzbank have recovered from earlier losses and are moving up.
U.S. stock futures are also pointing higher, indicating there will be a positive start to the week.
Most Asian markets closed out the day with losses. The Shanghai Composite dropped 1.2%.
3. Oil gushes up: Oil prices are trading around their highest level in more than a year.
Crude oil future are up another 1% to trade around $52 per barrel, which is roughly double the low point that was hit in February.
Investors have bid up the value of oil following OPEC’s decision last week to trim oil output. It’s a simple case of supply and demand; less oil equals higher prices.
4. Coming this week:
Monday – Markets react to Italy’s referendum; U.K. Supreme Court begins Brexit hearings; Victoria’s Secret Fashion Show
Wednesday – Senate hearing on AT&T-Time Warner takeover; GSA weighs in on Trump’s hotel lease; Starbucks Investor Day; India’s rate decision
Thursday – European Central Bank’s monetary policy meeting
Friday – Government spending measure expires
