In what is seen as another example of rising political "populism", Italian voters emphatically rejected proposed constitutional reforms, perceived by some as a blow to the eurozone and wider EU project.

The euro fell to its lowest level since March 2015 and gold prices gyrated after Italian voters opted by a 60-40 per cent margin to reject proposed reforms to the country’s political system. Italy’s prime minister, Matteo Renzi, offered his resignation.

Renzi had sought constitutional changes, including reducing the power of the Italian senate in the two-chamber system, to make it easier to enact legislation and hence reforms to an Italian constitution brought into force in the aftermath of the Second World War. Advocates said changes were necessary to make reforms to Italy’s sclerotic economy and hence strengthen the eurozone (there have, for example, been widespread concerns about Italy’s weak banking industry). Opponents said they feared changes to a structure expressly designed to avoid a rise of authoritarian rule as suffered by Italy before WW2.

Inevitably, as the referendum on the Renzi proposals followed the UK’s Brexit vote on 23 June and Donald Trump's election victory in the US, the Italian poll was seen as another sign of rising political populism and distrust of conventional wisdom. It was also seen, at least in some quarters, as a blow to the European Union and the euro.

“Italy's 'no' means a new political risk front has opened for the EU in Italy, with early elections likely in 2017, in addition to elections in France, the Netherlands, Germany and possibly the UK as we have previously suggested. Among the many possible outcomes of this constellation of European political risks in the year ahead is to complicate the Brexit timeline, with EU officials likely to focus on avoiding further exits, and leaders facing elections concentrating on domestic considerations rather than negotiating the terms of a new deal between the EU and the UK,” Citigroup said in a note today.

“More broadly, the victory for anti-establishment forces in Italy, coming hard on the heels of Trump and Brexit, could well embolden other erstwhile political challengers to capitalise upon what increasingly appears to be a winning political formula. Supportive Tweets from Donald Trump, UKIP's Nigel Farage and the National Front's Marine Le Pen followed the no result in Italy, clearly making the link to their own brands of anti-establishment challenge. The relatively short-lived and muted financial market response to Brexit and Trump could paradoxically appear to lower the costs of casting a protest vote by failing to prompt volatility,” the bank added.

The euro fell against a basket of currencies; against the dollar, it went as low as $1.0548 before recovering slightly (source: Bloomberg). Spot gold rose at the open of London’s trading session but retreated. It was quoted at around $1.1175 per ounce at the time of going to press. Financial spread-better IG Markets expects the EuroSTOXX 50 to open down 0.6 per cent, and Germany's DAX and Britain's FTSE to start the day 0.4 per cent lower (source: Reuters).

"The referendum outcome confirms a changing political landscape in Europe and the US. 2017 will bring more elections in Euroland, and the outcome of these may be even more relevant and likely to shape the fiscal policy stance, which ultimately could have an influence on Central Banks’ monetary policy," according to Pioneer Investments' head of global asset allocation research, Monica Defend,  and head of European governement bonds, Cosimo Marasciulo.

"On the fixed income side, we believe the `no' outcome and transition government scenario was already priced in, so spread volatility of peripheral countries should be short-lived, unless the conditions for setting the transition government are not met," they continued. "From a multi-asset perspective, we’ll keep a cautious view on Euroland equities as headline risks are still high amidst the crowded political agenda. However, we believe that this result will not derail our constructive outlook for 2017, with potentially higher growth and higher inflation on the radar globally," they added.

Another source of uncertainty for markets is the decision, expected today, by the UK’s Supreme Court on whether to strike down or uphold the recent High Court ruling stating that there must be a vote in the UK parliament to trigger the country’s exit from the EU. If the court upholds the ruling, it will add to fears that any move by the UK to leave the bloc will take years to conduct, and may not even happen at all.

Wealth managers have recently stated – as explained at a recent conference hosted by this publication – that even if the UK does move to leave the EU, it is far from clear to what extent the country will free itself of certain EU regulations, including those due to take effect in coming years, such as the MiFID II legislation to improve investor protection, and the EU’s updated data protection regime.