TOKYO (Reuters) - Asian shares extended a global sell-off in early trading Wednesday 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 on Tuesday, 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.
Tradeweb Markets LLC reported average trading volume in the debt is up by more than 60 percent in May compared to the month prior.
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
