European stocks have plunged after inconclusive elections left Italy facing political deadlock and rekindled fears of a new euro zone debt crisis.
Frankfurt, Milan, Paris and London all dropped in early trade. Shares in Italy’s main index fell as much as five percent, dragged down by losses of ten percent and more in the share price of the country’s the biggest banks, which are major lenders to the state. Safe-haven German bond yields fell sharply too.
Italy’s political uncertainty also created waves in the far east with investors wary of risky assets. In response, Japan’s Chief Cabinet Secretary Yoshihide Suga went on the offensive.
“What affects the European economy has an equally big effect on the world economy.
Therefore we continue to monitor the situation, not only in Italy, but also in other European
nations,” he said.
At an Italian treasury bill auction Rome’s borrowing costs rose.