LONDON: Shares in Italian banks slumped Monday on jitters over the outcome of a crucial weekend referendum, dragging down markets across Europe, while the outlook on an OPEC production deal fluctuated along with oil prices.
In afternoon trading, shares in Italian lenders Unicredit and Banco Popolare were down around 3 percent compared with Friday's closing levels.
The poor sentiment extended to the rest of Europe, with Royal Bank of Scotland and Societe Generale falling 1.4 percent, while Deutsche Bank shed 0.7 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.
Italy did not bail out its banks during the eurozone crisis, but has sought to recapitalise them via the markets. Two of its top three markets need to raise capital in the coming months.
The Financial Times reported Monday that up to 8 Italian banks could fail if market turmoil following a rejection of the referendum frustrates efforts to raise capital.
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