Italy: Its referendum time approaching - Nomura

Research Team at Nomura, suggests that the upcoming Italian referendum is a distraction, but it’s the potential political fallout that matters.

Key Quotes

“In a referendum on 4 December, Italy will decide on whether to reform parts of its constitution. A referendum on such a matter would not usually garner such attention from the markets, but this is different. Despite all his efforts to focus the campaign on the reforms at hand, Matteo Renzi has made this referendum partly about himself, stating that he will resign if he loses the referendum. In doing so, it has led to a united opposition against him with a rejection of the reforms likely, according to the polls.”

“A combination of these factors has the market attempting to price in the possibility of his resignation and the resultant fallout. Does this lead to early elections? Will the anti-euro Five Star movement gain a majority? These are questions the market could be asking itself on the Monday open after the results.”