Italian political crisis causes jitters in financial markets

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The S&P 500 and the Dow Jones Industrial Average registered their biggest one-day percentage drops in a month on Tuesday as political turmoil in Italy sparked concerns about the stability of the euro zone and shares of US banks tumbled.

US Treasury Secretary Steven Mnuchin is due to meet later this week with his counterparts at a Group of Seven ministerial meeting in British Columbia, Canada, an event sure to be dominated by the Italian crisis and Washington's multi-front trade disputes with major economies.

European markets fear Italy's political turmoil.

The sharp downturn followed from an equally harsh session on Wall Street on Tuesday, where the Dow Jones Industrial Average fell 1.6 percent, the S&P 500 lost 1.2 percent and the Nasdaq Composite dropped 0.5 percent. The Russell 2000 index fell far less than the Dow average, giving up 3.28 points, or 0.2 percent, to 1,623.65. The possibility of new elections in Europe's fourth largest economy looms large after the Italian president rejected a list of potential ministers, proposed by the anti-establishment parties.

Milan-listed equities snapped a five-day losing streak and bounced nearly 2 percent while short-dated Italian bond yields - a sensitive gauge of political risk - fell more than half a percent from half-decade highs.

The S&P/TSX composite index was up 51.68 points to 15,974.29, after 90 minutes of trading.

On Tuesday Britain's FTSE 100 and the French CAC 40 both sank 1.3% the German DAX lost 1.5%.

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That safe-haven trend receded on Wednesday, with the euro bouncing almost one percent versus the dollar and recouping all its Tuesday losses, which had taken it down to 10-month lows.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S. May 22, 2018.

Oil struggled under pressure from expectations that Saudi Arabia and Russian Federation would pump more oil to counter potential supply shortfalls from Venezuela and Iran, even as USA output has surged in recent years.

Wholesale gasoline gave up 1.7 percent to $2.14 a gallon.

Gold fell 0.4 percent to $1,299 an ounce.

On Wednesday Japan's Nikkei 225 stock index dropped 1.5%, South Korea's Kospi dropped 1.8% and the Hang Seng in Hong Kong slipped 1.2%.

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