Investors looked at the U.K.'s Supreme Court this Tuesday morning waiting for clarity on how messy the start of Brexit negotiations could be. However, the focus should be targeted further south.
Italian judges are to announce Tuesday or Wednesday their opinion on a proposal to update the country's electoral system. Their decision has a direct impact on how long the current political instability in Italy will drag on.
"Although the main market focus today is on the United Kingdom as far as court decisions are concerned, an ongoing constitutional court hearing in Italy has the potential to have a much greater impact on the future wellbeing of the EU," Alastair Newton, co-founder and director of Alavan, said in a note.
"Investors would therefore do well to keep a very careful eye on Italy and not allow themselves to be distracted totally by the ongoing election battles in France and The Netherlands, let alone Brexit," Newton added.
The proposals to update the Italian electoral system aim mainly to make clearer the winner in general elections.
President Sergio Mattarella wants the electoral law approved before he calls a snap election.
Italy is currently being governed by an interim government after former Prime Minister Matteo Renzi resigned after losing a referendum vote last December.
Analysts believe that if the court votes in favor of the changes, Italian voters could head to the polls as early as this summer.
"With anti-establishment sentiment and euroscepticism currently strong, this could result in a government committed to hold a referendum on Italy's membership of the euro zone," Newton added.