Wall Street indexes saw their steepest one-day declines in a month on Tuesday as traders expressed concerns about Italy’s political turmoil by withdrawing from the market. The banking sector was especially hard-hit, with JPMorgan chase falling 4.3 percent and Morgan Stanley plummeting 5.8 percent. The energy sector also struggled on Tuesday as expectations for a curb in OPEC’s production cuts continued to pressure oil prices.
Asian shares continued the downtrend on Wednesday, with South Korea’s Kospi leading the decline. The index was down 2.21 percent as of 2:01 p.m. HK/SIN. The Shanghai Composite was down 1.53 percent, the Nikkei 225 was down 1.60 percent and Hong Kong’s Hang Seng Index was down 1.64 percent.
Though there is no direct correlation between the S&P 500 and Italian politics, the tumult in Italy just reminds traders that there is a close connection between politics and economics, and that the balance can tip at any moment.
Italy has been unable to build a coalition since March and anti-establishment parties are gaining popularity and wreaking havoc on the euro. The common currency was trading at $1.156 in the mid-afternoon on Wednesday. The dollar also struggled after Washington announced on Tuesday that it would continue pushing towards trade restrictions against China. The announcement prompted a harsh response against the U.S. in the Chinese media. The dollar was trading lower against the yen at 108.78. It also continued its decline against most of its other trading partners including the Swiss franc, the Canadian dollar and the Australian dollar.