Market Update & Important Indicators:
Gains in financial companies helped push U.S. stocks higher, while the euro recovered from early losses as investors largely brushed off Italian voters' rejection of constitutional reform. Monday's relative calm underscored how investors had widely anticipated the result of Sunday's referendum and subsequent resignation of Prime Minister Matteo Renzi, selling Italian equities, bonds and the euro in the weeks leading up to the vote. The result from Italy did little to slow the postelection rally in U.S. banks. Shares of banks and other financial companies in the S&P 500 gained 0.9%. The financial sector has surged more than 14% since the U.S. election as investors bet that a Republican-led government would implement policies that would help banks' profits, such as tax cuts and regulatory rollbacks.
In Europe, the Stoxx Europe 600 rose 0.6%, despite losses in the Italian banking sector. Italian banks were hit on concerns that a period of political uncertainty could interfere with lenders' planned capital raising and bring an abrupt end to the government's efforts to clean up the banking sector. So far this year, shares of Banca Monte dei Paschi di Siena are down roughly 85%, while Italian bank stocks as a group are down about 50% as they grapple with low profitability and soured loans.
Stock markets in Asia fell Monday, as investors feared the "no" vote in Italy's referendum on Sunday could hurt the country's banking system and spark global contagion. Major markets in Asia saw sharp drops at the start of trade Monday, but these losses moderated over the day. Japan's Nikkei Stock Average, while Korea's Kospi's closed down 0.4%. Hong Kong's Hang Seng Index was 0.4% lower and the Shanghai Composite ended off 1.2%, even after the much-anticipated trading link connecting the Shenzhen and Hong Kong stock exchanges launched Monday. Italian Prime Minister Matteo Renzi offered to resign just as the Asian trading day began, after conceding defeat in the vote on constitutional reform. The prospect of political turmoil in Italy, which could end with an anti-Eurozone party in power, sent traders seeking safety. In Shanghai, investors bought defence stocks, driven by speculation that Mr. Trump's call with the Taiwanese leader would escalate military tension between Beijing and Taiwan.
Fresh geopolitical concerns weighed on Australian shares Monday. Falling for a second straight session, the S&P/ASX 200 lost 43.6 points, or 0.8%, to 5400.4. Most sectors fell, with the four largest banks collectively knocking almost 15 points off the ASX/200, although mining stocks recovered from a weak start to the day and utilities jumped on news Duet Group had received a multi-billion takeover offer from Hong Kong-based Cheung Kong Infrastructure Holdings. Sentiment was dampened by Sunday's referendum vote in Italy rejecting constitutional changes aimed at streamlining lawmaking and boosting competitiveness, raising fears it could hurt the country's banking system and lead to contagion.
On the London Metal Exchange, copper for delivery in three months was up 3.3% at $5,950/t. All other base metals were up on Monday. Aluminium prices rose 1.2% to $1,736/t, nickel rose 1.6% to $11,590/t, lead rose 2.2% to $2,306/t, tin rose 0.6% at 21,390/t whilst zinc rose 3.7% to 2,748/t.
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