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December, 4, 2016

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Italy vote hits European markets

LONDON -- European stock markets retreated Monday, dragged down by falling banking stocks ahead of a crucial Italian referendum at the end of week.

Around midday, shares in Italian lenders Unicredit and Banco Popolare were down 4 percent compared with Friday's closing levels.

The poor sentiment extended to the rest of Europe, with Royal Bank of Scotland shedding 2.6 percent, Deutsche Bank losing 2.1 percent and Societe Generale down 1.6 percent.

Tensions between Italian Prime Minister Matteo Renzi and the EU have reached a boiling point ahead of Sunday's referendum on constitutional reform.

"It's a key moment for Italy's banks," noted Neil Wilson, senior market analyst at ETX Capital.

"Sunday's referendum on constitutional reform is Italy's Brexit moment and a No vote would send tremendous shockwaves through the markets and the banking system.

"It could also heap pressure on the euro. Already crushed post-Trump, the euro could hit parity with the dollar if Renzi loses as Italy's place in the eurozone could be doubt," Wilson predicted.

OPEC Decision

Focus was also on the oil market ahead of a key OPEC output meeting Wednesday.

"Equities have started the week on the back foot, with investors concerned about Wednesday's OPEC meeting being a waste of time and next Sunday's Italian referendum having potential to send shivers through Europe's banking sector," said Mike van Dulken, head of research at Accendo Markets.

Crude prices saw fresh losses, after both main contracts slumped around 4 percent on Friday on disagreements over plans to cut output, with Iran and Iraq pressing to be excluded and Russia suggesting it will only freeze output.

Elsewhere Monday, Hong Kong led gains in most Asian stock markets after officials announced the start of a long-awaited link-up with Shenzhen, but the dollar retreated against most peers after its recent surge.

Officials on Friday announced that the tie-up between the Hong Kong and Shenzhen markets would start on Dec. 5.

The scheme will give Hong Kong traders access to the mainland's second stock exchange, the world's eighth largest with a market capitalization of US$3.3 trillion as of September.

The link follows a similar "stock connect" between Shanghai and Hong Kong launched two years ago, which gave foreigners new access to Chinese companies not quoted elsewhere, and enabled mainlanders to trade in Hong Kong.

The city's Hang Seng Index finished up 0.5 percent, though Shenzhen slipped 0.1 percent by the close. Shanghai ended up 0.5 percent.

Most other regional stock markets were up, extending last week's gains on bets that Donald Trump's spending plans would boost U.S. economic growth.

Key Figures Around 1130 GMT

London — FTSE 100: DOWN 0.6 percent at 6,801.54

Frankfurt — DAX 30: DOWN 0.8 percent at 10,616.83

Paris — CAC 40: DOWN 0.6 percent at 4,522.52

EURO STOXX 50: DOWN 0.6 percent at 3,028.91

Tokyo — Nikkei 225: DOWN 0.1 percent at 18,356.89 (close)

Hong Kong — Hang Seng: UP 0.5 percent at 22,830.57 (close)

Shanghai — Composite: UP 0.5 percent at 3,277.00 (close)

Shenzhen — Composite: DOWN 0.1 percent at 2,126.82 (close)

New York — Dow: UP 0.4 percent at 19,152.14 (close)

Euro/dollar: UP at US$1.0634 from US$1.0595 Friday

Dollar/yen: DOWN at 112.39 yen from 113.15 yen

Pound/dollar: DOWN at US$1.2430 from US$1.2478

Oil - West Texas Intermediate: DOWN 33 cents at US$45.73 a barrel

Oil - Brent North Sea: DOWN 30 cents at US$46.94

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