By Agence France-Presse
Global markets have been sent into a tailspin as a political crisis unfolding in Rome has thrust the stability of the eurozone and European Union back on to the agenda.
"As the third biggest economy in the EU, as a heavily indebted one, and with Eurosceptics seemingly in the ascendancy markets have worried that the EU again faces an existential crisis," Greg McKenna, chief market strategist at AxiTrader, said.
However, he added; "I'll go out on a limb and suggest there are a bunch of experienced political operatives in Europe and some neophytes in Italy who might just have got the shock of their lives on how quickly this situation developed and we'll see some backpedalling."
Italy was plunged into crisis when President Sergio Mattarella at the weekend vetoed the nomination of a fierce eurosceptic as economy minister, leading the prime minister-designate to step down and upending a bid by the anti-establishment Five Star Movement and the far-right League to form a government.
Mattarella then named Carlo Cottarelli, a pro-austerity economist formerly with the International Monetary Fund, to lead a technocrat government, with another election likely in a few months.
The chaotic developments have spooked investors, who fear another election will essentially be seen as a referendum on the country's future in the eurozone.
Adding to the selling pressure was a brewing crisis in Spain, where Prime Minister Mariano Rajoy faces a no-confidence vote after his party was found guilty of benefiting from illegal funds in a massive graft trial.
The euro dived against the dollar and yen Tuesday to lows not seen since mid-2017 and it extended the losses in Asian trade.
Trade woes return
Regional investors tracked big losses in Milan, Madrid and other European and US markets.
Tokyo ended the morning 1.8 percent down, Hong Kong lost 1.1 percent and Shanghai was 1.3 percent lower. Sydney gave up 0.5 percent, Singapore dived 1.7 percent and Seoul was 1.6 percent lower. Taipei, Manila and Jakarta were all sharply down.
The turmoil has also sent Italy's 10-year bond yields more than 300 basis points above Germany's -- around a five-year high -- reflecting investor concerns.
But US Treasury yields have tumbled as traders flock to assets considered safe -- yields go down the more the bonds are in demand -- while the yen, a go-to unit in times of turmoil, rallied.
High-yielding, riskier, currencies from the Korean won to the Indonesian rupiah tumbled.
Investors have also been spooked by Donald Trump's decision Tuesday to press ahead with imposing tariffs on Chinese goods despite ongoing talks to resolve the dispute.
The White House said the sanctions announced in March, largely focused on intellectual property, were still in the works and details would be announced in the coming month.
China said the move breached a consensus reached between Washington and Beijing earlier this month that called off a threatened trade war.
Oil prices were also down again as investors fret over Saudi Arabia and Russia's indication that they will lift an output cap that has helped support the crude market for the past two years.
Key figures around 0230 GMT
Euro/dollar: DOWN at $1.1523 from $1.1537 at 2100 GMT
Euro/yen: DOWN at 125.13 yen from 125.45 yen
Tokyo - Nikkei 225: DOWN 1.8 percent at 21,958.01 (break)
Hong Kong - Hang Seng: DOWN 1.1 percent at 30,156.04
Shanghai - Composite: DOWN 1.3 percent at 3,080.58
Pound/dollar: DOWN at $1.3253 from $1.3258
Dollar/yen: DOWN at 108.48 yen from 108.68 yen
Oil - West Texas Intermediate: DOWN two cents at $66.71 per barrel
Oil - Brent Crude: DOWN nine cents at $75.30 per barrel
Milan - FTSE MIB: DOWN 2.7 percent at 21,350 points (close)
London - FTSE 100: DOWN 1.3 percent at 7,632.64 (close)
New York - DOW: DOWN 1.6 percent at 24,361.45 (close)