Maintaining its 40 to 50 point fall the FTSE continued to find itself on the wrong side of 6800 this Monday, in part thanks to the 1-1.5% decline from key oil stocks BP and Shell. Also dragging the UK index lower was the banking sector, the likes of Barclays, RBS and Lloyds spooked not only by the prospect of Wednesday’s stress test results, but the sharp losses seen by their Italian peers.
With the likes of Unicredito and Banca Popolare di Milano dropping around 4%, and the ever-troubled Monte dei Paschi plunging 15% (Italy’s oldest bank revealed today it is facing legal claims totalling €8.5 billion), the market has taken a good look at Sunday’s Italian constitutional reforms referendum and decided it doesn’t like what it sees. The vote is being labelled Italy’s Brexit-moment – if ‘No’ prevails it could lead to political chaos in one of the Eurozone’s most precariously balanced members. It helps explain why the DAX and CAC, following the FTSE MIB’s lead, have both slipped nearly 1%; the euro’s gains against the dollar and pound, on the other hand, are more surprising.
Looking ahead to this afternoon and the dour tone of trading in Europe is set to infect the US open, with the Dow Jones facing a 70 point drop after the bell. The index won’t be too fussed; that still leaves it above 19100, and not too far away from the all-time highs hit at the end of last week.