The next vote that could shake Europe is coming up next week
The Brexit vote stunned markets in June, and Donald Trump shocked investors in November. The Italians may be next.
On Dec. 4, Italian citizens will vote in a referendum on whether to overhaul their national constitution, which probably has to be amended if Prime Minister Matteo Renzi is going to push badly needed economic reforms through the country's complicated lawmaking process.
The vote is widely seen as determining Renzi's political fate, and he may resign if a "no" vote prevails. Opinion polls show most Italians opposing the proposed constitutional changes, which economists say Italy desperately needs if it's going to streamline its government and spark growth.
If Renzi were to resign, that could in turn bolster support for Italy's right-wing populist party, the Five Star Movement, which is headed by former comedian Beppe Grillo. The Five Star Movement has agitated for Italy to leave the euro zone. Such an outcome may seem like a long shot, but at this point investors and others around the world are slower to dismiss such wild-card events out of hand.
The December referendum "could precipitate a wider euro zone crisis. People may not have been looking seriously at this pre-Brexit (and) Trump ... but in the year of the outsiders, they sure are now," said Jamie Reuben, principal at investment fund Reuben Brothers and one of the founding members of Metro Bank UK.
Less than a decade ago, the International Monetary Fund used to talk about Asian countries piling up too much in their currency-reserve stockpiles.
The global financial crisis turned that conclusion on its head, and now that U.S. interest rates are poised to keep climbing, the race is on to identify which countries have the strongest buffers against capital flowing out toward developed markets.
A measure developed by the IMF itself shows that Thailand and the Philippines may be best placed to withstand further downward pressure on the emerging currencies in Asia, based on calculations taken before the Donald Trump-induced U.S. reflation play roiled the foreign-exchange market.
The IMF last month forecast Thailand’s reserves at $163.3 billion at year-end, compared with the $64.9 billion needed according to the so-called Assessing Reserve Adequacy gauge, which incorporates criteria from short-term debt to money supply, imports and investment flows. The Philippines was heading for a $84 billion hoard, against a $31 billion need.
The measure shows Malaysia -- not coincidentally the worst performing of the major emerging Asian currencies against the dollar this month -- faring poorly by comparison, with a $100 billion reserves projection against short-term external debt of $128.2 billion, based on IMF estimates. Looking beyond Asia, Turkey, South Africa and Mexico are among those deemed more vulnerable by the assessments.
“Malaysia and Turkey are classic example of countries whose reserve levels are falling to a critical level in comparison with the amount of their short-term external debt,” Takahide Irimura, an economist at Mitsubishi UFJ Kokusai Asset Management Co., which oversees about $114 billion, said in a phone interview. "When the overall market trend is down, investors are looking for who is more vulnerable and weak reserve position is also highlighted.”
Oil falls on strong dollar, high crude supplies despite planned cut
Oil prices fell more than 1 percent on Friday as a strong dollar and a rise in Saudi supplies to some Asian clients, weighed on markets, despite a planned OPEC-led output cut to be decided next week.
International Brent crude oil futures were trading at $48.31 at 0650 GMT, down 69 cents, or 1.4 percent, from their last close, although overall activity was thin after the U.S. Thanksgiving holiday and ahead of the weekend.
U.S. West Texas Intermediate (WTI) crude futures were at $47.33 per barrel, down 63 cents, or 1.3 percent, from their last settlement.
Reference: CNBC,Bloomberg,Reuters
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