Markets in Europe are set for a day of losses following the announcement of Italian Prime Minister Matteo Renzi that he intends to resign after a defeat in a key referendum.
The Italian MIB is seen 370 points lower at 1676.7 but political concerns spread to other bourses.
The Spanish IBEX should start 156 points lower at 8513.1; the German DAX is seen 67 points down at 10467.5; the French CAC should be 21 points lower at 4507.7 and the FTSE 100 should open 26 points lower at 6704.8.
More than 65 percent of Italian voters rejected the government’s proposal on constitutional reform. Renzi had said he would resign if the reform wasn’t approved by voters.
Investors are worried with the possibility of new elections in the third largest euro economy and with the impact that the ongoing political instability will have for the fragile banking system.
The euro has fallen during Asia trading to a 20-month low.
European finance ministers are gathering in Brussels on Monday, but the Italian representative Pier Carlo Padoan has cancelled his attendance.
Meanwhile in France, Prime Minister Manuel Valls is set to announce his bid for the presidency later Monday, according to Reuters.
The euro dropped to a 20-month low on Monday in Asia as investors assessed the implications of the resignation of Italian Prime Minister Matteo Renzi after he suffered a humiliating defeat in a referendum over constitutional reforms.
Asian shares held in negative territory on Monday with Australia’s ASX 200 closed down 0.8 percent, or 43.62 points at 5,400.4.
Elsewhere, the NZX 50 ended down 0.726 percent, or 50.14 points at 6,854.71 after Prime Minister John Key said he would resign, citing it as “the right time” as he would not seek a fourth term. The New Zealand dollar was weaker against the dollar at 0.7107 as of 1:30 pm HK/SIN, near a session low against the dollar of 0.7070.
Chinese shares were lower as the long-awaited Shenzhen-Hong Kong Stock Connect launched today, which will give mainland investors access to Hong Kong-listed stocks, and allow international investors to trade Shenzhen-listed stocks.
The Shenzhen composite slipped 0.55 percent, but technology stocks bucked the trend to trade higher. Dongxu Optoelectronic Technology was up 4.08 percent at 13.53 yuan per share, while Shenzhen O-film Tech was up 4.71 percent at 36.88 a share.
In Hong Kong, the Hang Seng index was down 0.23 percent.
Gold prices dipped on Monday, giving up early gains as the U.S. dollar rose on expectations that the U.S. Federal Reserve will raise interest rates at its policymaking meeting next week.
The losses, however, remained modest amid jitters over the resignation of Italian Prime Minister Matteo Renzi after he lost a referendum on constitutional reform.
Spot gold slipped 0.1 percent to $1,175.81 an ounce by 0458 GMT. U.S. gold futures were steady at $1,177.80 per ounce.
“Looks like people are buying the U.S. dollar and that is in turn prompting selling in gold,” said Yuichi Ikemizu, head of commodity trading at Standard Bank in Tokyo.
“People bought gold after the Italian referendum and it looks like they are selling back.”
Investors and Europe’s politicians fear victory for Italy’s opposition ‘No’ camp could cause political instability and renewed turmoil for Italy’s banks, pushing the euro zone towards a fresh crisis.
The referendum outcome could be taken as another sign of rising anti-establishment sentiment in the core of Europe, potentially eroding investor confidence in the euro ahead of elections in the Netherlands, France and Germany next year.