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Italian Markets Tumble as Political Uncertainty Persists

30 May, 2018, 21:07 | Author: Ted Wilson
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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%. Shares fell in Southeast Asia and Taiwan. Bond yields dropped, and with them, interest rates on mortgages and other kinds of loans, hitting bank stocks on expectations lenders would earn thinner profits.

US 10-year Treasuries were yielding 2.817 percent in the Asian afternoon, edging up from the USA close of 2.768 percent, while S&P futures ESC1 rose 0.2 percent.

The S&P 500 and the Dow Jones Industrial Average registered their biggest one-day percentage drops in a month on Tuesday as political turmoil in Italy sparked concerns about the stability of the euro zone and shares of US banks tumbled. The Dow Jones industrial average turned negative for the year, losing 1.6 per cent to 24,361.45.

The S&P 500 posted 7 new 52-week highs and 12 new lows; the Nasdaq Composite recorded 87 new highs and 48 new lows.

Investors fear that repeat elections in the euro zone's third-largest economy - which could come as soon as July - may become a de-facto referendum on Italian membership of the currency bloc and its role in the European Union.

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In Asia, traders also fretted over the on-again, off-again U.S.

"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.

Safe-haven U.S. Treasury bonds and German bunds rallied, as did the Japanese yen, the U.S. dollar and gold.

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 United States and China.

The 10-year Italian government bond yield jumped to 3.19% bond prices fell, compared to just under 2% around two weeks ago. Oil prices have slumped in the last week following reports that OPEC countries and Russian Federation could start pumping more oil soon.

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