Asian shares languish as Italian turmoil hits world markets

Elaine Kurtenbach, The Associated Press</span>
Published Wednesday, May 30, 2018 3:16AM EDT

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.

KEEPING SCORE: Japan's Nikkei 225 stock index dropped 1.5 per cent to 22,018.52. South Korea's Kospi dropped 2.0 per cent to 2,407.95. The Hang Seng in Hong Kong slipped 1.5 per cent to 30,034.07 and the Shanghai Composite index fell 1.6 per cent to 3,072.76. Australia's S&P ASX 200 fell 0.6 per cent to 5,979.00. Shares fell in Southeast Asia and Taiwan.

WALL STREET: Prices for U.S. government bonds surged as investors shifted money from stocks into lower-risk investments. 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. The S&P 500 index 1.2 per cent to 2,689.86. The Dow Jones industrial average turned negative for the year, losing 1.6 per cent to 24,361.45. The Russell 2000 index fell far less than the Dow, giving up 0.2 per cent to 1,623.65. The Nasdaq composite fell 0.5 per cent to 7,396.59. In Europe, the German DAX lost 1.5 per cent and Britain's FTSE 100 and the French CAC 40 both sank 1.3 per cent.

ITALY: Investors dumped Italian government bonds, driving borrowing costs sharply higher for that 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.

ANALYST'S VIEWPOINT: "Worries over geopolitics look set to hit Asia after sweeping through Europe and also the U.S. 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," Jingyi Pan of IG said in a commentary.

CURRENCIES: New jitters about the stability of the euro sent the currency's value against the dollar to its lowest level in almost a year. The dollar fell to 108.53 yen from 109.77 yen. The euro sank to $1.1533 from $1.1537.

TREASURIES: U.S. government bond prices jumped as investors moved money into lower-risk assets. The yield on the 10-year Treasury fell to 2.78 per cent, its lowest since early April, from 2.93 per cent. By mid-afternoon Asia time it was at 2.81 per cent.

ENERGY: U.S. crude oil fell 25 cents to $66.50 per barrel in electronic trading on the New York Mercantile Exchange. It dropped 1.7 per cent to $66.73 a barrel in New York. Oil prices have slumped in the last week following reports that OPEC countries and Russia could start pumping more oil soon. Brent crude, used to price international oils, shed 38 cents to $75.11 a barrel in London.

AP Markets Writer Marley Jay in New York contributed to this report.

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