Thelocal sharemarket fell sharply yesterday as an indecisive national election in Italy raised the prospect of another sell-off in European bond markets that could rekindle the continent's debt crisis.
Italy was headed for a political impasse after a left-wing coalition led by the Democratic Party's Pier Luigi Bersani failed to secure a majority in the senate, despite a razor-thin lower-house majority over former prime minster Silvio Berlusconi. If a new government is unable to guarantee clear parliamentary support, Italians could return to the polls within months. A similar situation in Greece rocked global financial markets last year.
The benchmark S&P/ASX 200 closed down 1 per cent at 5003.6, after falling as much as 1.5 per cent in early trading. The index set a two-week low of 4978.4, testing technical support at that level.
Consumer companies unwound Monday's strong gains, with Woolworths, Wesfarmers and Coca-Cola Amatil down between 1.2 per cent and 2.2 per cent. Resources also underperformed, with BHP Billiton, Rio Tinto and Fortescue Metals down between 0.9 per cent and 3 per cent.
