European political fears take a toll on markets

LONDON — World stocks fell on Friday in nervy trade before Italy’s crunch referendum and Austria’s elections, amid fears that both could send shockwaves reverberating across markets. Four weeks since Donald Trump’s stunning US election victory and five months after Britons voted to leave the European Union, this weekend’s eye-catching events are squarely in the spotlight. In Europe, Frankfurt, London and Paris each shed about 1.0 percent around midday, and Milan slipped 0.6 percent ahead of Sunday’s vital vote in Italy. In Asia, Japan’s Nikkei, which on Thursday closed at its highest level this year, slipped 0.5 percent, while Hong Kong gave up 1.4 percent and Shanghai slipped 0.9 percent. As traders also awaited publication of all-important US non-farm payrolls (NFP) data, the dollar was lower against the yen and pound. “The outcome of the referendum could have a significant impact on the short-term euro volatility,” said London Capital Group analyst Ipek Ozkardeskaya. Worries over Italy had hit banking shares hard at the start of week. Italy goes to the polls for a referendum on constitutional reform, with Prime Minister Matteo Renzi saying he will resign if his government loses, leading to a possible general election. Austria’s presidential election, also due Sunday, pits far-right hopeful Norbert Hofer against Greens-backed candidate Alexander Van der Bellen. Ahead of the weekend events, the NFP figures could potentially set the stage for another year-end interest rate hike from the US Federal Reserve, according to dealers. “Equities are under pressure into the weekend, understandable with a line-up of risk events that kicks off with the US jobs report this afternoon, seen sealing the deal for a Fed rate hike on Dec. 14,” said Mike van Dulken, head of research at Accendo Markets. “Thereafter, it’s all about European politics with Sunday’s Italian referendum likely impacting both domestic and eurozone banks come Monday and Austria’s presidential election seen delivering the first far right head of state in Western Europe.” Oil prices retreated as investors took a step back from a recent rally. World markets have been generally rising since Donald Trump’s shock US election win on hopes his big-spending, tax-cutting policies will boost the world’s largest economy. The advance was given extra impetus Wednesday when OPEC agreed on a plan to cut oil production, sending crude prices soaring. — AFP