Euro Slips With Asian Stocks While Bonds Rise as Italy Votes No 

• Renzi to resign as referendum defeated; Kiwi down as Key quits
• Yuan falls offshore on Trump tweets; oil drops on U.S. output

The euro retreated with stocks, while bonds rose, amid concern the failure of Italy’s referendum on constitutional reform will destabilize the country and embolden nationalist movements. The yuan weakened offshore after Donald Trump took on the Chinese government via social media.

The common European currency touched its weakest point in 20 months as Prime Minister Matteo Renzi said he’ll quit after opponents of his proposal to rein in the senate’s power won Sunday’s vote by about 60 percent to 40 percent. Asian shares and U.K. stock index futures fell, while government debt tracked a rebound in Treasuries from Friday, when mixed U.S. jobs data weighed on equities. Oil declined on signs producers outside of OPEC will boost output.

The defeat of Renzi’s reforms, aimed at simplifying the legislative process in a nation that’s seen 63 governments since the end of World War II, follows Britain’s shock vote to exit the European Union and Donald Trump’s unexpected victory. The U.S. president-elect rejected criticism of his decision to take a phone call from Taiwan’s president and reiterated concerns over China’s currency and trade policies to his 16.6 million Twitter followers.
“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. ”

Currencies

• The euro weakened 1.1 percent to $1.0552 as of 1:50 p.m. in Tokyo, paring a slump of as much as 1.5 percent from earlier in the session. Losses were limited as Austrians spurned the appeal of an anti-immigration nationalist, electing a Green Party-backed economics professor as their next president. The Polish zloty lost 1.2 percent, the Danish krone slid 1 percent and the Japanese yen swang between gains and losses.
• The British pound declined 0.3 percent. Fresh divisions within the U.K. government were exposed as Foreign Secretary Boris Johnson declined to endorse the proposal of some colleagues that Britain consider paying the European Union for continued access to its markets after Brexit.
• The offshore yuan lost 0.2 percent to 6.8895 per dollar, its first loss in three days, as Chinese shares declined. “Some might see the U.S. drawing a line for the yuan at 7 against the dollar” by naming China a currency manipulator, said Cliff Tan, East Asian head of global markets research at Bank of Tokyo-Mitsubishi UFJ in Hong Kong. “But if the Chinese economy is still slowing, others will conclude the yuan has to weaken beyond 7 eventually. In the end, we think fundamentals will win.”
• The kiwi weakened 0.5 percent to 71.06 U.S. cents as New Zealand Prime Minister John Key, a former currency trader, said he’ll stand down and backed Finance Minister Bill English to succeed him.
• The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, jumped 0.5 percent following its first weekly retreat since Trump’s victory. The greenback has climbed on speculation he will stoke growth with fiscal stimulus.
• U.S. employers added 178,000 workers to payrolls last month, after rising by a revised 142,000 people in October, and the jobless rate slid to a nine-year low. Hourly wages declined for the first time since the end of 2014, data out Friday showed.

Bonds

• Yields on Australian government debt due in a decade snapped a four-day climb, slipping by seven basis points to 2.79 percent.
• Similar maturity New Zealand notes yielded 3.19 percent, down five basis points, as rates on Chinese bonds dropped three basis points to 3.02 percent.
• Ten-year Treasury yields fell three basis points to 2.35 percent after shedding seven basis points on Friday.

Stocks

• The MSCI Asia Pacific Index declined 0.5 percent, with Japan’s Topix index retreating 1 percent, Australia’s S&P/ASX 200 Index down 0.7 percent, the Kospi losing 0.2 percent in Seoul and New Zealand’s S&P/NZX 50 Index dropping 0.7 percent.
• The Shanghai Composite Index fell 1.3 percent, while the Hang Seng China Enterprises Index lost 1.1 percent.
• Futures on the S&P 500 Index decreased by 0.3 percent, with the underlying benchmark ending Friday up less than 0.1 percent.
• FTSE 100 Index futures dropped 0.6 percent.

Commodities

• West Texas Intermediate crude fell 0.7 percent to $51.31 a barrel, following its best week since 2011, as U.S. producers boosted the number of rigs drilling for crude to the most since January after OPEC approved its first supply cut in eight years.
• Copper for three-month delivery rallied 1.8 percent, while zinc gained 2.4 percent and Nickel rallied 1 percent. Gold swung between gains and losses, after falling 0.5 percent last week, its fourth straight weekly loss.

Source: Bloomberg

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