Global markets plunge on Italian vote deadlock

City A.M. Reporter

POLITICAL deadlock in Italy sparked a global equity sell-off this morning, sending safe-haven German bond yields sharply lower as it reignited concerns that the Eurozone’s debt crisis strategy is left in chaos.

Europe’s third-largest economy and most indebted state faced deadlock after a protest vote left no party or likely coalition with enough seats to form a majority.

The FTSE 100 fell sharply this morning following the impasse, down around 1.2 per cent in early trading.

The Eurozone is Britain's biggest trade partner and crucial to its own hopes of an economic recovery.

Other European markets also slumped. Paris's CAC-40 and Frankfurt's DAX were down as much as 2.5 per cent. The pan-European FTSEurofirst 300 index was down 1.3 per cent.

German 10-year bond yields were down eight basis points to 1.5 per cent, while riskier Spanish and Portuguese bonds came under heavy selling pressure.

The euro briefly touched a seven-week low against the dollar to trade near $1.30 after no clear majority emerged from the Italian vote, raising the prospect of weeks of political uncertainty and potentially another election later in the year.