Forget OPEC, focus is now back to European politics - BBH

As we await the presser from OPEC after the news that OPEC have agreed a deal to cut output production, finally, analysts at Brown Brothers Harriman explained that with OPEC apparently reaching an agreement to cut output, the focus can shift back to Europe.  

OPEC agrees first output cut since 2008, Saudis to take 'big hit' - (Reuters)

OPEC reportedly said to plan meeting with non-OPEC producers on Dec 9th - (FXStreet)

Key Quotes:

"Before getting to the ECB meeting next week, where an extension of the asset purchases are expected to be announced, alongside some adjustments to the reduce the challenge of scarcity of some instruments and pressure in the repo market, there are two political events over the weekend.  On Sunday, Italy holds a referendum on changes to the size and power of the Senate, and Austria holds its presidential election.   

Most investors have focused on the Italian referendum.  Renzi has indicated he would resign if the referendum lost, but recognized that link as a mistake.  The polls, for what they may be worth, have shown a close contest but one that those who are inclined to reject the referendum have consistently been ahead.  It simply is not known the Renzi's reaction function.  He may not resign, and if he does resign, a caretaker government may be needed to work out the political reforms that are necessary before the election.   

Earlier this year, the rules for electing the lower chamber were changed, leaving the two chambers with two different electoral rules.  Parliamentary elections are not slated until 2018.  While the 5-Star Movement did well in the municipal elections earlier this year, a defeat of the referendum does not automatically sweep them into the national government.  Moreover, Italian rules about referendums and treaties suggest that even if the 5-Star Movement wins early elections, it is not clear that it could hold a referendum on EMU or EU.  

 In any event, the point is the likely rejection of the referendum will not change things significantly for Italy in the near-term.  Renzi could very well resign and be replaced with a technocrat.  Renzi's reform efforts have depended on the decree, which does not require immediate parliamentary approval.  That suggests that a technocrat government might not be that big of a deal for the perspective of investors, even though many observers see the referendum as posing significant and imminent political risk.   

Recall too that the opposition to the referendum is not just from the 5-Star Movement or the populist-nationalist right.  Not only are some of Renzi's PD opposed, but so is former EU Commissioner and Prime Minister Monti.  The classical liberal Economist magazine also came out against the referendum."