DAX 30 Down as European Equities Fall on Eve of Italian Referendum

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The DAX 30 is down just under 1% at lunchtime today with markets waiting for U.S. jobs data announcements and this weekend’s referendum on constitutional reform in Italy. Current polls show the ‘yes’ vote, backed by Prime Minister Matteo Renzi was behind in the latest opinion polls, 46.5% to 53.5%. However, the polls also showed that 20% of voters are as yet undecided and it is thought that many of those are likely to back Renzi in the end. The proposed reforms would mean that proposed laws would only need to be approved by the lower house of parliament, taking power away from the Senate. Currently, both houses must give approval for a new law to be passed.

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The greatest consequence of a failure by Remzi to win the vote is considered to be the danger that the country’s banking sector is in. According to a report in CNCB:

“Officials and senior bankers….anticipate that up to eight of Italy’s troubled lenders are at risk of failure should Renzi lose the upcoming referendum.

Megan Greene, chief economist at Manulife Asset Management, believed that the referendum in Italy could provoke another banking crisis in Europe”.

It is this scenario, rather than the political changes, which is worrying equities markets around Europe today. Deutsche Bank is down 1.59% and the more European-focused Commerzbank 2.22%. Insurer Allianz is down 0.97%. Corporate software company SAP is down 2.09% after technology stocks suffered a downturn in the U.S. on Thursday, a trend which continued over to Asia’s Friday session. Siemens is also down 1.46%. Carmakers BMW, Daimler and Volkswagen are also all down so far on Friday with respective losses of 1.37%, 0.5% and 1.54%.

The only two companies on the DAX enjoying a positive Friday so far are Adidas, the sportswear giant up 0.22% and energy company RWE holding onto a tiny 0.04% gain by its fingernails.

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