European Stocks Rebound Shrugging Off Italian Referendum

European stock markets are mostly moving higher, with peripherals outperforming and the Italian MIB fully shrugging off the referendum result and bouncing back approximately 1%. DAX and FTSE 100 meanwhile are higher as EUR and GBP rise against USD. A ruling by the FCA that takes a tough stance on spread betting firms added to pressure on the FTSE 100. DAX outperformance meanwhile was supported by a ruling from Germany’s top court that energy companies are entitled to compensation as the government moved to speed up an exit from nuclear energy following Fukushima. Oil prices are down on the day with WTI lower by more than 1%.

There are reports again that the EU wants post Brexit deal ahead of official talks. A consensus is forming among EU government to issue British PM May with an ultimatum that demands clarity on the post-Brexit trade relations between the U.K. and the rest of the EU ahead of the official negotiations, in return for a transitional phase that banks and businesses demand to adjust to the new arrangements.

Eurozone Q3 GDP Confirmed as Expected

Eurozone Q3 GDP confirmed at 0.3% quarter over quarter, as expected, although the annual rate was revised slightly higher to 1.7%. The breakdown, which was released for the first time, showed consumption underpinning the quarterly growth rate, with household consumption contributing 0.2% points to the quarterly growth rate and government consumption 0.1% points. Investment was neutral, although the marked upward revision to Q2 investment growth to 1.2% quarter over quarter suggests that overall investment trends are less disappointing that initially feared, even if growth slowed down markedly to 0.2% quarter over quarter in Q3 again.

Import growth outstripped export growth in Q3 and net exports detracted 0.1% points from the quarterly growth rate. The backward revision to the investment number was encouraging. Looking ahead, indicators suggest an acceleration in growth in Q4, which makes Q3 numbers already looking rather backward looking.

The Banking sector is front and center following the Italian referendum this weekend.  Italy’s Monte Paschi once again in the spotlight, as executives meet ECB officials on its capital plan with Paschi CEO Morelli reportedly considering delaying the sale of NLPs to 2017 as advisers want definite answers from Qatar and other potential anchor investors by December 12. Meanwhile the Italian Treasury is said to prepare a precautionary plan B that also includes direct intervention of the state in Paschi’s capital. Paschi bondholders agreed to swap about EUR 1.02 billion of subordinated notes for shares, almost a quarter of the EUR 4.3 billion of debt offered subject to the swap and broadly in line with expectations despite the referendum result.

German construction PMI jumped to 53.9 in November from 52.9 in October. Together with the strong manufacturing orders number this morning and generally positive survey indicators, the data adds further confirmation to expectations for a renewed acceleration in overall growth in the last quarter of the year.