Stocks surge despite Italian referendum
|Despite initial weakness at Italian referendum result, a sharp recovery for European stock markets and the euro bears a striking similarity to the Brexit and US election results.
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Stocks rebound despite Italian no vote
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Pollsters get it right for once
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UK services sector confounds Brexit fears
European markets have been surprisingly resilient this morning, as initial fears of another eurozone crisis have been largely brushed aside. Sharp depreciation in the euro and European indices have been swiftly reversed, bearing more than a passing resemblance to the UK referendum and US election results. Fears over the future for Italian banks will persist, with recapitalisation plans thrown into doubt after Renzi’s exit. However, this morning’s recovery is a clear sign that market perception is that despite causing uncertainty, this result is unlikely to spark a major crisis for the banks.
The pollsters will be celebrating today’s result, as they finally got it right at the third time of asking. However, we have seen a very similar market reaction to this referendum result as that seen for both the US election and UK referendum, with initial fears brushed aside by those seeking to push the stock markets higher. This time there is no hope of a substantial stimulus package to prop up stocks, but instead the more predictable nature of the result means that much of the weakness had already been factored into stock and euro valuations.
UK services is growing at an enviable clip in November, with the PMI reading rising to the highest level since February. Despite a slowdown in both manufacturing and construction, a buoyant services sector will help prop up UK growth, with the three surveys providing an estimate of 0.5% for Q4 GDP. Despite a strong showing for services employment growth and total activity, all is not completely rosy, with ongoing fears over the Brexit implications leading to a fall in business sentiment, to its lowest reading since July.
Ahead of the open we expect the Dow Jones to open 10 points higher, at 19,134.
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