Fund managers have warned of short-term volatility following Italy's vote against constitutional reform in this weekend's referendum, which they say could "exert a baleful influence" on the country's struggling banking sector.
With most ballots counted in Sunday's referendum, Italy voted by 60% to 40% to reject Renzi's (pictured) proposals to greatly reduce the power of the Italian Senate in order to simplify and speed up the process of passing laws. This was a wider margin than expected for the 'no' vote, with the turnout also high at around 70%.
In a late-night news conference, Prime Minister Renzi said he took responsibility for the outcome, and said the 'no' camp must now make clear proposals.
Although the euro fell to levels last seen in March 2015 following the vote, the response from European markets and across the industry was measured, with the 'no' vote already priced in.
However, managers have highlighted the challenges ahead for Europe's third largest economy, especially for its troubled banking sector.
Adrian Lowcock, investment director at Architas, said markets have so far taken the result of the referendum "in their stride", with the result being seen as a domestic issue, rather than a problem for the wider eurozone.
"In Europe, the ECB had already indicated it would be willing to buy more Italian bank bonds to provide support to the market and shares had eased off last week as markets waited for the result," he said.
However, Lowcock added the potential for a fresh election in Italy over the next few weeks could weigh on markets.
"Italy is vulnerable; it has a weak banking system, a huge amount of debt and lacks the flexibility needed to address its issues. Because the country is a member of the eurozone it cannot devalue its own currency, nor can the government step in to recapitalise its banks without triggering a constitutional crisis."
Similarly, Jon Jonsson, senior portfolio manager, global fixed income at Neuberger Berman, said the vote could "exert a baleful influence" on Italy's struggling banking sector.
He added that markets are likely to view the 'no' victory as a negative factor in the ongoing recovery of Italy's overall economy, and said it could also lead to rising euro scepticism across the eurozone.
"As we saw after the US election and the Brexit vote, markets could fully price these developments sooner than expected and reach oversold levels," he said. "We believe patience is key and that there may be opportunities to use any substantial sell-off to buy attractively priced assets."
Announced plans to merge last October
Sterling fell 0.25% to $1.281
In June 2016, immediately before the Brexit referendum, a curious thing happened.
AUM has grown to $2bn in a year
Unclear on job moves