Italy’s Political Crisis Sparks Eurozone-meltdown Fears, Stocks Fall Across the Globe

Italy’s Political Crisis Sparks Eurozone-meltdown Fears, Stocks Fall Across the Globe

Italy’s Political Crisis Sparks Eurozone-meltdown Fears, Stocks Fall Across the Globe

The number of investors expecting the euro zone to lose at least one member state in coming months has increased due to the political crisis in Italy, a survey showed on Tuesday.

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.

Most of those declines followed the sharp drop in the yield on the 10-year U.S. Treasury bond below 3 percent as the demand rose. Industrial and health care companies are also faring worse than the broader market.

EURO WOES: The euro, which has been in retreat for weeks, sank further, falling to its lowest level against the dollar this year.

The S&P 500 index fell 31 points, or 1.2 percent, to 2,689. Britain's FTSE 100 climbed 0.7 percent to 7,729 and Italy's FTSE MIB jumped 2.6 percent to 22,340.

On Tuesday, markets got another scare when Italy failed to patch together a new coalition government, raising the odds of another election late this summer or fall that could result in a rise to power political parties who aren't fans of Italy staying in the 19-country eurozone.

Investors parked money in lower-risk assets like USA and German government bonds.

It looks like the debt-crisis days of 2012 all over again for investors, as Italian, Portuguese and Greek bond yields surged and billionaire George Soros warned of an "existential threat" to the EU.

For southern European companies, the sudden resurgence of political jitters means credit conditions could quickly deteriorate, which would offset the benefits of a lower currency, Mateos y Lago said.

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 rose 0.2 percent.

Prices excluding energy, food and alcohol (Core CPI) this month rose 1.1 percent year-on-year after growing 0.7% in April.

USA stocks are opening lower, following sharp drops in Europe triggered by political uncertainty in Italy. Some of the worst losses went to European banks: Germany's Deutsche Bank dropped 6.2 percent to $11.30 and Banco Santander of Spain lost 9.1 percent to $5.31.

Bond prices rose as investors moved money into lower-risk assets. The yield on the 30-year Treasury bond, meanwhile, was down at 3.006 percent.

Giuseppe Conte has been sworn in as Italy's prime minister, heading western Europe's first anti-establishment government bent on overhauling European Union rules on budgets and immigration. Enraged at losing their chance at governing following inconclusive elections in March, both the anti-establishment 5-Star Movement and the anti-euro League vowed with other parties to vote against a Cottarelli government when it faces a vote of confidence in parliament, expected later this week.

Chinese shares also headed south, with the Shanghai Composite index down 1.4 percent.

The Dow Jones industrial average lost 206 points, or 0.8 percent, to 24,547.

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