By Giovanni Legorano

ROME--Italian stocks are set to start trading deep in the red, reflecting worldwide uncertainty on the outlook for the global economy after Donald Trump won the U.S. presidential election.

Stocks of companies exposed to the U.S. market such as Luxottica SpA and Ferrari are expected to suffer heavy losses at market opening, opening down 11% and 9%, respectively.

Traders said Italy's Ftse Mib is expected to open down around 4.4%, with several stocks failing to starttrading at market opening due to large and numerous selling orders. Other European stock exchanges are expected to suffer similar losses at opening.

Banking stocks are UniCredit S.p.A. (UNCFF) Ferrari N.V. (RACE) Banca Monte dei Paschi di Siena S.p.A. (BMPS.MI) Luxottica Group S.p.A. (LUX.MI) expected to be the most penalized, with UniCredit SpA and Intesa Sanpaolo SpA seen starting trading down at around 8%. Troubled Banca Monte dei Paschi di Siena SpA is seen opening down more than 20%.

Traders said Mr. Trump's victory may give a boost to populist parties in Italy ahead of a constitutional referendum in the country which threatens to unseat Prime Minister Matteo Renzi's government.

Populist parties in Italy have surged over the last couple of years, with the anti-establishment Five Star Movement now neck-and-neck with the center-left Democratic Party as the largest political group in the eurozone's third-largest country.

Markets have been nervously watching the outcome of a popular referendum on Dec. 4. Italians will vote on a constitutional reform proposed by Prime Minister Matteo Renzi aimed at overhauling Italy's legislature.

However, Mr. Renzi has pledged to resign in the case of a 'no' vote, thus transforming the ballot into a vote on the government itself.

With the economy stalled and Mr. Renzi's popularity waning, recent polls show the 'no' vote with a slight advantage, although a quarter of respondents say they are undecided. Markets have been unnerved at the prospect of a 'no' vote that would lead to the resignation of Mr. Renzi and possibly usher in a protracted period of political instability.

Such jitters could make it impossible for Monte dei Paschi di Siena to find sufficient investor support for a EUR5 billion capital increase planned for this winter. If that deal fails, some fear the government will have to bail out the bank.

Write Giovanni Legorano at giovanni.legorano@wsj.com

(END) Dow Jones Newswires

November 09, 2016 03:14 ET (08:14 GMT)

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