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European stocks fall after Italy government's referendum defeat European stocks open lower after Italy governmment's referendum defeat
(35 minutes later)
European stock markets tumbled after Italian Prime Minister Matteo Renzi said he would resign on Monday following a crushing defeat on constitutional reform. European stock markets have tumbled after Italian Prime Minister Matteo Renzi was dealt a crushing defeat over his referendum on constitutional reform.
Mr Renzi confirmed he will resign following aftter 60 per cent of the public voted against his proposed changes. 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 with the impact that the ongoing political instability will have for the fragile banking system. 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 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 spreadig 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 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 after immedtialty after Mr Renzi's announcement as investors feared that another chapter of eurozone debt crisis drama was opening up. However, the markets reaction was more muted than expected. Despite slipping into the red, most European shares, with the exception of the benchmark Italian FTSE MIB index, were beginning to move back to positive territory.
“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. ”
  
More follows  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."
Meanwhile, Italy's  main banking index slid by 3 per cent, hit by fears that the ongoing attempts to strengthen several lenders could be at risk.
Shares in Monti dei Paschi, Italy’s oldest bank, which is trying to raise €5bn in new capital and offload €28bn of bad loans, have slumped by 6 per cent in early trading.
 
Claus Vistesen, chief euro zone economist at Pantheon Macro, said in a note: "The economy could easily grind to a halt due to political uncertainty. It could also prevent urgent action on the country's ailing banks. A deal with the EU on recapitalization can't be postponed for much longer if Italian politicians want to avoid a sudden failure of one or more of the country's mid-size banks."