By Roland Jackson, AFP
LONDON — European stocks and the euro rebounded sharply Monday as investors were reassured by the speed of Italian Prime Minister Matteo Renzi’s resignation after losing a crunch referendum, but Asian markets struggled. Hong Kong and Shenzhen stocks sank Monday as a long-delayed link-up between the two exchanges got off to a weak start, with worries about European uncertainty overshadowing the launch. The Hang Seng Index slipped 0.26 percent, or 59.27 points, to close at 22505.55 and the Shenzhen Composite Index, which tracks stocks on China’s second exchange, decreased 0.78 percent, or 16.32 points, to 2,068.17. The benchmark Shanghai Composite Index slipped 1.21 percent, or 39.13 points, to 3,204.71. Tokyo’s benchmark Nikkei 225 index lost 0.82 percent, or 151.09 points, to end the day at 18,274.99, while the Topix index of all first-section issues was off 0.75 percent, or 11.02 points, at 1,466.96. European markets began the day in negative territory, with Milan tumbling two percent, but recovered somewhat with sentiment soothed also by the defeat of the far right in Austria’s presidential election. “The Italian referendum is the major story that will dominate market moves throughout Monday … after Renzi left his position after a bruising defeat,” said GKFX analyst James Hughes. “The initial market reaction was to the downside, but Renzi’s decision to leave so quickly after the result meant that added clarity drove the euro and European equity markets to the upside.” Renzi stood by his promise to resign after his attempt to change the constitution was overwhelmingly rejected in Sunday’s poll, leading to fears about the future of one of the eurozone’s biggest economies. The referendum verdict sent the European single currency crashing to US$1.0506 — the lowest level since mid-March 2015 — before recovering slightly on Monday. Equities also staged a recovery. Frankfurt won 1.5 percent, Paris gained 1.1 percent and London added 0.3 percent, reversing initial losses. “European markets have been surprisingly resilient … as initial fears of another eurozone crisis have been largely brushed aside,” said IG analyst Joshua Mahony. “Sharp depreciation in the euro and European indices have been swiftly reversed, bearing more than a passing resemblance to the U.K. referendum and U.S. election results.”
‘Judgement call’ Populists in Italy and throughout Europe rejoiced at Renzi’s downfall, in the wake of anti-establishment poll shocks in both Britain and the United States.
“This referendum was seen more as a judgement call on Renzi’s premiership than the reforms on offer; by rejecting the PM, Italy has displayed the same kind of anti-establishment populist sentiment that has defined 2016 for the U.K. and U.S.,” said Spreadex analyst Connor Campbell.