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Market Lab Report - Premarket Pulse 12/5/16

Major averages finished Friday roughly flat on lower volume. The NASDAQ Composite closed just below its 50-day moving average for a second day in a row. After the pummeling stocks took earlier in the week, today's bounce was weak and had major averages closing in the lower half of their trading ranges.

Futures are up almost half a percent as investors shrug off the Italian referendum matter. Concerns were that the “no” vote could spark a political crisis and a selloff in Italy’s stock market which would spill over into the US markets.

While such a vote has prompted a resignation from Prime Minister Matteo Renzi, analysts have said this is not be the beginning of the failure of the euro or of the EU as they argue that Europe has faced far more problematic and challenging situations. 

According to one analyst, “Perhaps the backing of the central bank to contain any negative fallout is helping to keep investor spirits up, even though the result itself may have just presented an opportunity to another antiestablishment movement that favors a referendum on eurozone membership,” said Craig Erlam, senior market analyst at Oanda.

“The combination of steady U.S. economic growth, which won’t need too hawkish a stance from the FOMC to manage, along with the prospect of further QE from the ECB seems to be generating perfect conditions to extend the bull market rally,” said Jamieson Blake at ADS Securities London.

Nevertheless, the move creates some uncertainty for Italy, Europe’s fourth-largest economy, as it brings Italy one step closer to leaving the EU, thus the EU one step closer to a potential break-up.

On Thursday, the ECB will hold its regular monetary policy meeting to decide on the scope of its quantitative easing and other measures. Analysts largely expect that will include some extension of its asset buying program.

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