Friday 22 June 2018

Euro near 10-month low as fears over Italy turmoil spread through global markets

Investors monitor stock prices in a brokerage house in Beijing on Wednesday (AP Photo/Mark Schiefelbein)
Investors monitor stock prices in a brokerage house in Beijing on Wednesday (AP Photo/Mark Schiefelbein)

Italy's political turmoil has stoked fears of instability in the euro bloc, causing stocks to fall in Asia on Wednesday after turbulent sessions in the US and Europe.

Investors dumped Italian government bonds, driving borrowing costs sharply higher for the country and rekindling fears of more financial strain for Europe's third-largest economy.

The political upheaval will likely lead to new elections, and investors are interpreting the new vote as a referendum and that Italy could move closer to abandoning the euro if populist parties win the election.

That could have major implications for the European financial system and its economy.

On Wednesday Japan's Nikkei 225 stock index dropped 1.5%, South Korea's Kospi dropped 1.8% and the Hang Seng in Hong Kong slipped 1.2%.

Elsewhere the Shanghai Composite index fell 2%, Australia's S&P ASX 200 fell 0.6% and shares also fell in Southeast Asia and Taiwan.

On Tuesday Britain's FTSE 100 and the French CAC 40 both sank 1.3% the German DAX lost 1.5%.

The new jitters about the stability of the euro sent the currency's value against the dollar to its lowest level in almost a year.

"Worries over geopolitics look set to hit Asia after sweeping through Europe and also the US at the start of the week.

"That being said, a heavy data calendar from Wednesday could shift some attention back to economic growth and monetary policy," said Jingyi Pan of IG.

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