Italy gridlock shakes up global markets

Arturo Kim
May 30, 2018

Stocks have skidded in Asia as Italy heads for another round of elections that investors worry could become a referendum on whether to stay in the euro bloc.

The populist parties' effort to form a government foundered on their choice of an anti-euro figure as economic minister, rejected by Mattarella.

Asian stocks extended a global sell-off on Wednesday as Italy's political crisis rippled across financial markets, toppling the euro to a 10-month low, pushing up borrowing costs for Rome and sending investors into safer assets such as U.S. Treasuries. It has fallen 4.5% so far this month.

Investers are concerned that the anti-austerity, eurosceptic 5 Star and League could increase their majority at the next election.

The Dow Jones Industrial Average fell 391.64 points, or 1.58 percent, to 24,361.45, the S&P 500 lost 31.47 points, or 1.16 percent, to 2,689.86 and the Nasdaq Composite dropped 37.26 points, or 0.5 percent, to 7,396.59.

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Japan's Nikkei futures traded in Chicago pointed to a 1.4 percent fall in the Nikkei. The yield on Italy's main 10-year bond rose to its highest level in more than four years, spiking as high as 3.42 percent at one point in morning trading in Europe.

"Worries over geopolitics look set to hit Asia after sweeping through Europe and also the U.S. at the start of the week". The dollar fell to 108.53 yen from 109.77 yen. -North Korean summit and the U.S.

As the end of its worst day since April 24 in terms of percentage, the Dow Jones index slipped almost 400 points, or 1.6%, depressed over political uncertainty in Italy and a new round of trade tensions between the U.S. and China.

Indonesia's central bank is holding an out-of-cycle policy meeting on Wednesday, and is expected to raise its benchmark interest rate for the second time in two weeks, according to a Reuters poll.

US crude futures retreated 0.2 percent to $66.58 per barrel CLc1, extending losses into a sixth consecutive sessions.

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