Morning Update – 05/12/2016 – by Arjun Lakhanpal

Morning all…Quite a busy weekend with the Austrian election and Italy referendum. Austria decided not to go down the populist route but the far right did get a lot of votes which may embolden others when voting later next year across Europe. In Asia we saw the Nikkei down 0.8% as some risk aversion builds and EUR had a very choppy night obviously as Italy voted NO. This is a huge concern and not just for Italy and their bond markets. It is generally thought that the Italian banks may suffer and Draghi may not be able to start tapering bond purchases. EUR looks like being very choppy with wild swings expected.  Opened at 1.0670-80, down to 1.0620, results came out, 1.0505 low (lowest in 20 months), and 1.0594 paid. Interestingly USDJPY is holding up with this risk aversion and many other currencies are only slightly impacted showing inherent strength for the dollar. In New Zealand, the kiwi dollar has underperformed after PM Key unexpectedly announced his resignation (citing family reasons). Mr Key said he would back FM and Deputy PM English to succeed him. All eyes on how EU bonds react and what if anything Draghi says later.. This morning we get Swedish Industrial Production and Spanish, Italian, French, German, EU and UK services PMI, Spanish IP.. Good luck..