Markets Drop Amid US-China Tension, Italy Crisis

Markets Drop Amid US-China Tension, Italy Crisis

Asian stock markets slumped Wednesday as jitters spread over Italy's escalating political crisis and renewed US-China trade tensions.

Japan's Nikkei and Hong Kong's Hang Seng both fell around 1.5 percent, while the Shanghai Composite sank more than 2 percent.

Markets were calmer in morning trading in Europe, with most major indexes posting small gains or losses.

The declines across Asia came after a sell-off Tuesday in Europe and the United States, where the Dow closed down 1.6 percent, reports CNN.

Traders in Asia said investors were exiting riskier assets such as stocks after political turmoil in Italy sparked fears over the future of the euro and the White House revived plans to slap tariffs on $50 billion worth of Chinese goods.

Italy is headed for new elections after populist politicians failed to form a government, and investors worry the result could throw the European Union into turmoil. They are demanding higher yields to hold Italian government debt.

"This potential crisis is monumental," Stephen Innes, head of Asia-Pacific trading at foreign exchange firm Oanda, said in a note to clients.

He pointed out that Italy's economy is far bigger than that of Greece, the source of the last eurozone crisis.

Investors in Asia are also worried about President Donald Trump's hardening stance on trade with China.