What Happens Next In Italy: Here Is Goldman's Take

While the market overcame its initial scare following yesterday's counter-establishment Italian referendum vote, and European stocks proceeded soar in the overnight session by the most since Trump's presidential victory, what happens next in Italy is largely unknown. What follows are Goldman's snap thoughts on the Italian next steps.

Fed Labor Market Conditions Index Contracts For 5th Straight Month

Despite a small rise MoM, The Fed's own Labor Market Conditions Index has now deteriorated year-over-year for 5 straight months, despite significant upward revisions over the last 6 months, most notably in September and October. As Deutsche's Jo Lavorgan notes,"the upshot is that the economic outlook remains fragile despite the ostensible robustness of the labor market."

Gold Double-Slammed As 'Traders' Puke $3.5 Billion Notional Through Futures Markets

The Italian referendum's "no" vote sparked the rational reach for safe-havens as the Euro-endgame became more questionable... but that lasted less than an hour and since the $1190 highs overnight, gold has been monkeyhammered to 10-month lows amid two legs lower (EU open and US open) with spikes in volume of around $3.5 billion notional...

"Things Have Tapered Off" - US Services Economy Jumps To 13-Month Highs But New Orders Stall

After spiking to 2016 highs in September/October, the US Services economy slipped lower in November according to Markit with signs of margin squeezes appearing as input cost inflation hits a 15-month high, but prices charged remained flat, and payrolls growth remains weak (well below average). However, ISM reported a big beat, with Services at the highest since Oct 2015 (despite a drop in new orders).

Key Events In The Coming Weeks: Italy Aftermath, ECB, ISM, Consumer Confidence

The key economic releases this week are ISM non-manufacturing on Monday and University of Michigan consumer sentiment index on Friday. Away from the US economic calendar, initially focus will be on the Italian referendum result, which appears to have been mostly digested by the market as bullish. It will then shift quickly to a critical ECB meeting.

Frontrunning: December 5

  • Italy Sinks Into Political Limbo as Defeat Sweeps Renzi Away (BBG)
  • Investors Shrug Off Italy Referendum Result (WSJ); Markets Rise After Italy Turns Down Referendum (BBG)
  • Italy’s ‘No’ Poses Trouble for Eurozone (WSJ)
  • Oil tops $55 for first time in 16 months as OPEC deal fuels buying (Reuters)
  • Merkel regrets Renzi resignation but will work with new Italy government (Reuters)

Japan Prime Minister Abe To Visit Pearl Harbor, A First For A Japanese Leader

In another sign that conventional diplomatic protocol is changing on a daily basis, on Monday Japanese Prime Minister Shinzo Abe said he would visit Hawaii on Dec. 26 and 27 for his final summit meeting with outgoing U.S. President Barack Obama. Abe will be the first incumbent Japanese Prime Minister to visit Pearl Harbor after Tokyo launched a surprise attack on the U.S. naval base in December 1941.

European Stocks Soar, US Futures, Euro Jump After Failed Italian Referendum

Another miraculous overnight recovery has eliminated all the bearish aftertaste from the failed Italian referendum. As Guillermo Sampere of MPPM EK put it: "After Brexit, it took three days for markets to shake it off, with Trump it took three hours, with Italy it took three minutes.The fast money, who expected markets to fall further with this outcome, are now covering their positions."