Article / 29 November 2016 at 8:00 GMT

Morning Markets: Italian banks spark contagion fear

Former managing editor, / Saxo Bank



  • Eurozone: Business and Consumer Confidence Indicators    (1000 GMT) 
  • US: Q3 GDP                                                                            (1330 GMT) 
  • US: Consumer Confidence Index                                            (1500 GMT) 

A dreadful opening to the week for Italian banks sparked by a Financial Times report spread beyond its borders to send tremors through the European banking sector with just five days to go before Italy votes on constitutional reform.

Italy's largest bank Unicredit tumbled 5.7% Monday and second bank Intesa Sanpalo fell 4.2% with the likes of the Royal Bank of Scotland, Deutsche Bank and Societe Generale all taking significant hits in the aftermath. The Italy 40 came close to breaking beneath the 16.0 handle before closing down 1.5% on the open and nearly 3% from its intraday high on November 25.

The referendum has effectively become a proxy vote for EU membership with the anti-euro Five Star Movement party looking to sweep up the scraps if prime minister Matteo Renzi's gambit to ease the process of decision making in Italy fails and push for an election in 2017 which would almost inevitably focus on Italy's membership of the common currency.

Elsewhere, oil once again swung on the vagaries of Opec headlines as the latest focused on Iran's oil minister and his hopes for a deal. Both Brent and WTI climbed above $48/barrel and $47/b respectively, but in the hour before the European open, that wave of optimism had started to subside pushing the key benchmarks back some $0.50/b.

The dollar is showing signs of emerging from the Thanksgiving-induced stupor of the last few days to probe for weaknesses among its major peers. Sterling in particular looks vulnerable dipping below the 124.0 handle this morning after European Central Bank president Mario Draghi warned London that it would come off worst in a tit-for-tat descent into protectionism.

Embarrassingly for Theresa May's government, an eagle-eyed photographer also gave the world a glimpse into Britain's negotiation stance on Brexit by catching on camera handwritten notes of an aide based on a "have cake and eat it" approach when dealing the "very French" negotiating team. Nothing like revealing your hand of course in a game of poker.

But it is Italy, with the Opec meeting tomorrow a strong second, that is dominating the headlines, sending the Trump-led rally story of the last three weeks to the background. EURUSD is back below the 106.0 handle and another bad day for Italian banks and the Italy 40 as a whole could spark the pair lower, especially if dollar does shake off the holiday doldrums.

Market signals

Asian session

  • Japan's household spending came in at minus 0.4%; minus 1% was expected
  • Unemployment rate stayed steady at 3% while retail sales fell 0.1% in October
  • Asian markets opened mixed on overseas leads
  • The ASX200 closed down 7 points to 5458 thanks to gains in the big-four banks
  • South Korea's embattled president has offered to relinquish power
  • Qantas drops bid for deeper partnership with American Airlines
  • Iron ore rose 1.5% to $80.83/tonne
  • Australia's monthly new-home sales fell by 8.5% in October – a two-year low
  • Oil prices gained more than 2% ahead of Opec's official meeting Wednesday

Forex ahead

  • The JPY is trading stronger against the USD; in early Asian trade it was at 111.84 
  • The greenback pulled back pushing other major currencies higher
  • EURUSD looking to test 105.0 and then 104.62

From the Floor

Back to normal. "The ’Trump euphoria' trend is fading,” says Moltke-Leth

Solid resistance. “Copper has hit a brick wall at $2.75”, says Hansen

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

Sentiment is in the frame today with the Eurozone's business confidence indicator set to track up to a five-year high for November, writes James Picerno.

No lift-off
Qantas is dropping its bid to form a deeper partnership with American Airlines after the US regulator ruled it would harm competition, says Saxo Capital Markets (Australia).

Asian conundrum
Asian emerging markets can't catch a break, caught between fears around a stronger USD or fears around the global outlook, says Saxo's APAC team.


Italy votes Sunday and Europe waits...nervously. Photo: iStock

Morning Markets goes out on the TradingFloor platform at 0800 GMT, Monday to Friday.
Click here
to make sure you're up to date with the latest developments.

Martin O'Rourke Martin O'Rourke
The Italy 40 has started positively in the opening hour heading above the 16.30 mark, supported by a return to the green for Unicredit and Intesa Sanpalo, but Italy's biggest bank has lost momentum to head back towards the 1.90. mark.


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail