TOKYO, May 30 2018 : Asian shares extended a global sell-off in early trading today as Italy’s political crisis provoked a heavy retreat on Wall Street, sent the euro to a 10-month low and pushed up borrowing costs for the government in Rome.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 1.1 percent, while Japan’s Nikkei average shed 1.7 percent to hit a six-week low. South Korea’s KOSPI and the Australian stock benchmark slipped 1.6 percent and 0.7 percent, respectively.
On Wall Street yesterday, the Dow Jones Industrial Average fell 1.58 percent to 24,361.45, the S&P 500 lost 1.16 percent to 2,689.86 and the Nasdaq Composite dropped 0.5 percent to 7,396.59.
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 the country’s role in the European Union.
Short-dated Italian bond yields – a sensitive gauge of political risk – soared 1.5 percentage points from Monday to their highest since 2013 in their biggest move in nearly 26 years.
Safe-haven U.S. Treasury bonds and German bunds rallied, as did the Japanese yen, the U.S. dollar and gold. The euro fell against the Swiss franc, Japanese yen and U.S. dollar, nearing $1.15 and touching its lowest point since July.
“It’s not surprising that investors fled fragile emerging markets and southern Europe and sought safety in cash,” said Yasuo Sakuma, chief investment officer at Libra Investments.
In Asia, the focus was also on the on-again, off-again U.S.-North Korean summit and the U.S.-China trade relationship.
An aide to North Korean leader Kim Jong Un arrived in Singapore on Monday, Japanese public broadcaster NHK reported, and the White House said a “pre-advance” team was traveling to the city to meet the North Koreans.
The reports indicate that planning for the summit, initially scheduled for June 12, is moving ahead.
The United States also said yesterday that it would continue pursuing actions on trade with China, days after Washington and Beijing announced a tentative solution to their dispute and suggested that tensions had cooled.
Oil struggled under pressure from expectations that Saudi Arabia and Russia would pump more oil to counter potential supply shortfalls from Venezuela and Iran, even as U.S. output has surged in recent years.
U.S. crude futures stood at $66.45 per barrel after falling for five sessions. – Reuters