World markets retreated Tuesday as a big vote for anti-austerity parties in Italy’s elections left the eurozone’s third biggest economy in political deadlock, sparking fears of a revival of the region’s debt crisis.
European stock markets were sharply lower, led by a 4% plunge on Italy’s index of leading shares. Italy’s borrowing costs increased, as the yield on its 10-year bond moved up towards 5%, triggering similar moves in other weaker eurozone states such as Spain and Portugal. The euro fell to just above $1.30.
“Italy’s election looks set to deliver some of the worst-case outcomes that markets had feared but had largely ruled out as unlikely,” noted Shahab Jalinoos, a strategist at Swiss bank UBS.