Asian Shares Languish as Italian Turmoil Hits World Markets

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.

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

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 lost 1.2 percent to 2,689.86. The Dow Jones industrial average turned negative for the year, losing 1.6 percent to 24,361.45. The Russell 2000 index fell far less than the Dow, giving up 0.2 percent to 1,623.65. The Nasdaq composite fell 0.5 percent to 7,396.59. In Europe, the German DAX lost 1.5 percent and Britain’s FTSE 100 and the French CAC 40 both sank 1.3 percent.

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.

“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.

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.

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 percent, its lowest since early April, from 2.93 percent. By mid-afternoon Asia time it was at 2.81 percent.

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 percent 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.