World shares slide on election in Italy

Italy's inconclusive election result sparked a sell off on world equity markets on Tuesday and sent safe-haven German bond yields sharply lower as investors feared a resurgence of the euro zone debt crisis.. The euro briefly touched a seven-week low against the dollar to trade near $1.30 after no clear majority emerged from the vote, raising the prospect of weeks of political uncertainty and potentially another election later in the year.. "This is the worst possible outcome from the market's point of view," said Alessandro Tentori, Citigroup's head of global rates.. Yields on 10-year Italian government bonds jumped 45 basis points to 4.82 per cent while Italy's main stock market index tumbled five per cent with shares in some of the country's major banks down over 10 per cent.. Other European markets were also slumping, with London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX down as much as 2.5 per cent. The pan-European FTSEurofirst 300 index was down 1.3 per cent.. Italy's centre-left bloc led by Pier Luigi Bersani narrowly won control of the lower house but no party or coalition appeared to be in a position to take a majority in the equally powerful Senate. A party led by the anti-establishment comic Beppe Grillo gained more than 25 per cent of the vote.. "The very close result and the stalemate between the two houses of parliament point to a non-trivial risk of new elections," Holger Schmieding, chief economist at Berenberg Bank, adding there was also a small risk that new elections could lead to a referendum in Italy on the euro.. The euro steadied at around $1.3080, up about 0.15 per cent after falling as low as $1.3039, its lowest since January 10. The focus will now be on an Italian treasury bill auction later, when Rome's borrowing costs could rise.. Financial markets were rattled last week by minutes of the Federal Reserve's January meeting showing some Fed officials were thinking of scaling back its monetary stimulus earlier than expected.. US stock futures were flat to suggest a cautious Wall Street start.. Copyright @ Thomson Reuters 2013

World shares slide on election in Italy

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