Here's what 5 investment banks are saying about Italy's referendum result

Alberto Pizzoli/AFP/Getty Images

Markets are volatile but not in crisis after Italians voted to reject Prime Minister Matteo Renzi’s constitutional reforms.

Renzi resigned after the defeat, sending the euro and Italian banks crashing in early trade, only for prices to recover shortly afterwards.

Investment banks’ analysts and economist have been all over the referendum, sending out notes to clients on what the impacts of the vote will be.

Here is a selection:

DEUTSCHE BANK: There'll be an equity market sell-off

Marco Stringa, Deutsche Bank's senior economist, wrote:

'We think the Italian equity market could initially drop by 5%-10%, led by financials, with a continued sell-off if the prospect for an interim government diminishes. We expect markets to re-price European equity risk, particularly mid to longer-dated equity volatility through 2017.'

CITI: Political volatility will weigh on European banks

Citi analysts Azzurra Guelfi and Borja Ramirez Segura wrote:

'While the referendum results should not significantly impact the Italian operations of European banks, it is likely to increase fear over political risk in Europe and negatively weigh on banks valuation.'

BARCLAYS: Brace for elections next year but don't count on them

Barclays analysts led by Fabio Fois wrote:

'Early elections in Q2-Q3 2017, after the approval of the voting system reform, may happen but our baseline is for the next government to remain in office until the end of the current legislature (February 2018).'

STATE STREET: Investors will dump Italian government bonds

Antoine Lesné, EMEA head of ETF strategy at State Street Global Advisors, wrote:

'We expect this to trigger a sharp widening in Italian spreads to the tune of potentially 10bps followed by the hope of a tightening around 150-160bp vs German 10 year bonds in the medium-term. This vote paves the way for further rejection vote in Europe though and reminds us of the political headwinds that 2017 will bring. Volatility management remains necessary for long term portfolio construction in face of such events.'

NOMURA: Watch the euro for Italian election risk

Nomura FX analysts wrote:

'It is tough to say how much more the Italian political uncertainty will weigh on EUR until we know if we can rule out the possibility of snap elections being called before the electoral law has been changed. If Italy goes to elections without making those changes then that opens up the possibility of the tail risk scenario of the Five Star movement gaining power. In that scenario markets would be having to price for the new era in politics spreading into the Eurozone that could see EUR finally failing the test.'

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