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Will Italy’s ‘No’ Vote And Renzi Resignation Lead To A European Crisis?

Italy’s Prime Minister Matteo Renzi said he will resign after a referendum he was backing to streamline Italy’s government was soundly defeated in a vote earlier today.  According to exit polls, as much as 60% of the Italian population voted “no” in an action that is widely being viewed as populist and anti-establishment, similar to Brexit, and the Trump presidential victory in the United States. In international markets, the euro has dropped to its lowest level against major currencies in more than a year, falling  to a rate of 1.05 to the U.S. dollar. Italy’s bonds, which have performed dismally, are also likely to decline in the coming trading sessions.

  Germany opposed an Italian bank bailout, a position that grows increasingly awkward by the day in view of growing problems in its own banking system.” Lewitt has been advising his clients to raise cash and buy gold.

Blackrock’s Chief Investment Strategist Richard Turnill says that the situation in Italy is endemic of the troubling rise in populism across Europe stemming from economic stagnation.”We see a strong “no” vote delaying any fixes to the country’s (Italy’s) sick banking system and emboldening populist parties,” says Turnill, in his most recent weekly commentary. Blackrock remains neutral on European government bonds but favors investment-grade debt due to the ECB’s ongoing purchases. Blackrock is underweight European equities.

S&P 500 futures are down, as are European markets. In early morning trading, Asian markets are lower. Gold is up slightly, trading at about $1177 per ounce.

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