European stock markets have tumbled after Italian Prime Minister Matteo Renzi was dealt a crushing defeat over his referendum on constitutional reform.
Mr Renzi immediately confirmed he will resign on Sunday night after 60 per cent of the public voted against his proposed changes.
Investors are worried over the possibility of new elections in the third-largest euro economy and the impact that the ongoing political instability will have on the fragile banking system.
The pan-European Stoxx 600 began Monday 0.05 percentage lower with bank stocks leading the losses, falling more than 1.2 percent.
The Italian MIB was 2 per cent lower, but political concerns were spreading to other bourses with Germany’s Dax, France’s CAC, and UK’s FTSE all down between 0.8 per cent and 1.3 per cent.
The euro plunged to a 20-month low immediately after Mr Renzi’s announcement as investors feared that another chapter of eurozone debt crisis drama was opening up.
“The first reaction to Renzi resigning is euro selling, but the more important event is parliament’s dissolution and the general election in Italy,” said Daisuke Karakama, chief market economist in Tokyo for Mizuho Bank Ltd. “Elections in the Netherlands, France, Germany and Italy next year will keep the euro pressured. The euro could reach $1.02 in January-March period.”
