Market positioning ahead of Sunday's constitutional referendum suggests guarded optimism after weekly gains for Italian stocks.
European investors lifted Italian markets higher this week as the country heads to the polls for an historic referendum on parliamentary reform Sunday amid pleas from Prime Minister Matteo Renzi for citizens to "think of the future of your children".
Italy's FTSE MIB index ended Friday's session with a modest 11 point, or 0.07%, decline, but weekly gains for the benchmark topped 4.5% and bested a 0.85% advance for the Europe-wide Stoxx 600 Index. Even the country's beaten-down banks were able to book gains this week, with the FTSE Italia Banks Index rising more than 5.8% on the strength of better five-day performances for UniCredit SpA (UNCFF) (+7.2%) and Intesa Sanpaolo (ISNPY) (+4.9%), the country's two biggest lenders.
Monte dei Paschi di Siena (BMDPY) , however, slipped around 2.3% on the week following its 100-to-1 share conversion which re-set its equity price at €20 per share. MPS is attempting a €5 billion debt-for-equity swap it hopes will shore up its ailing balance sheet and avoid a government-led rescue that could wipe out subordinated and senior bondholders.
Italian government bonds have also performed well this week, with yields on benchmark 10-year BTPs falling 13 basis points to 1.91% and taking the extra yield, or spread, that investors demand to hold the debt instead of triple-A rated German bunds to 1.63%, 20 basis points lower than at the start of the week.
Renzi's last-minute media blitz before the vote, however, suggests the Prime Minister is feeling slightly less confident than European investors. In a radio interview Friday, Renzi asked voters to "think of your future and the future of your children" as they head to the polls even as his Economy Minister, Pier Carlo Padoan, assured there was "no risk of a financial earthquake" in the event of a "No" victory.
Around 52 million Italians will essentially be asked to vote "Yes" or "No" on a package of amendments which would streamline the upper chamber of parliament, reduce the overall number of lawmakers and ostensibly make future reform bills easier to pass. Collectively, the changes would comprise the most significant alterations to Italian politics in at least 75 years.
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Under Italian law, the final public poll before Sunday's vote was published on November 18 and suggested a comfortable win for the "No" camp. However, with more than fifth of eligible Italians undecided and pollsters under fire for serious misjudgements in Britain's Brexit referendum and the U.S. Presidential elections, victory is by no means assured.
Voting on Sunday will begin at 7am CET (1am Eastern) and run until 11pm CET (5pm Eastern). Italian television will begin broadcasting exit poll forecasts shortly after, but the first estimates of actual vote counts won't come for at least 30 minutes and will updated regularly.
A clear win for either side could be known as early as 1:30am in Rome, about the time markets open for trading in Japan, or as late at 3:00am in the Italian capital.
Source: https://www.thestreet.com/story/13912569/1/italy-markets-book-weekly-gains-ahead-of-historic-constitutional-referendum.html
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