The UK Index ’s banks are weighing heavily on the UK flagship index into the new week (16pts out of a 60pt decline) on fears that a No vote in next Sunday’s Italian constitutional referendum could mean the toppling of PM Renzi and death toll for some of the country’s battered banks. Fears are that an Italian dissent and resulting market turmoil would dissuade already gutsy investors from daring to participate in desperately needed recapitalisations within a very troubled €4tn banking system. If they don’t Brussels may be forced to step in and wind them up, whatever the cost to all investor, not just shareholders. This is serving to revive memories of the dark days of the Eurozone debt crisis with risk that financial contagion fear spreads across the continent like wildfire.

With the clock ticking towards another the next potential anti-establishment surprise following Brexit and Trump, investors are understandably nervous. Especially after the Economist magazine last week urged the Italian public to vote against proposed economic reforms, seeing them as badly designed and unlikely to do anything to eradicate cronyism and corruption and get the economy going again. What could make matters worse is if the Austrians vote in the far right Freedom party on Sunday night too and if a stateside Election recount situation becomes more complicated. Hence political risk back front and centre, here to keep us occupied as a dysfunctional OPEC meets in Vienna to discuss what to do buoy oil prices. The trouble is all, including Saudi Arabia. want to have their higher price, production cut cake and eat it.

Mike van Dulken, Head of Research, 28 Nov