Fears over Italy turmoil spread through global markets

Italy gridlock shakes up global markets

The podium where Carlo Cottarelli was waited to talk with reporters, after a meeting with Italian President Sergio Mattarella, is seen at the Quirinal palace in Rome, Italy, May 29, 2018.

"The direct connection between the Italian government and the S&P 500 is tenuous, but it indirectly reminds people of geopolitical uncertainty", said Ed Keon, chief investment strategist at QMA in Newark, New Jersey.

Stocks in the US and Europe sank following political turmoil in Italy, which stoked fears of instability in the euro bloc. A steep drop in USA bond yields, which drives interest rates lower on loans, weighed heavily on banks.

Investers are concerned that the anti-austerity, eurosceptic 5 Star and League could increase their majority at the next election. Shares fell in Southeast Asia and Taiwan.

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.

European markets fear Italy's political turmoil. 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.

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Safe-haven U.S. Treasury bonds and German bunds rallied, as did the Japanese yen, the U.S. dollar and gold. The euro also hit its lowest mark against the dollar this year.

The S&P 500 posted seven new 52-week highs and 12 new lows; the Nasdaq Composite recorded 95 new highs and 51 new lows.

In Asia, the focus was also on the on-again, off-again U.S. -North Korean summit and the U.S.

Emerging market stocks.MSCIEF lost 1.2 percent, marking a new low point for the year, under continued pressure from a rising US dollar for countries that often borrow in that currency. By mid-afternoon Asia time it was at 2.81 per cent.

Shares of energy companies were also led lower by a drop in USA crude oil futures on expectations that Saudi Arabia and Russian Federation could pump more crude to compensate for a potential supply shortfall.

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

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