World shares slid towards their lowest level in a year yesterday, as negative drivers from fatigued earnings and Saudi Arabia’s diplomatic isolation to a brewing spat over Italy’s finances piled on the pressure.

Wall Street looked set to for another jolt lower but it was heavy selloffs in both Asia and Europe, which was heading for a fifth day of uninterrupted falls, that did the main damage.

The tech sector posted the worst performance after Swiss-listed chipmaker AMS plunged 25 per cent as its outlook triggered alarm bells, but there was a broader force at play.

The pan-European STOXX 600 was near a two-year low with almost half of its stocks now in bear-market territory – down 20 per cent from their peak.

Germany’s DAX dropped to late 2016 lows, MSCI’s world share index was just two points of a one-year low while Wall Street’s S&P 500 was set to test the lower limits of its 200-day moving average again.

Yesterday, Italian bond traders were biding their time amid reports of some conciliatory moves from Rome’s coalition but the spat has also bred doubts about the European Central Bank plans to possibly raise its interest rates next year.

Questions about the future of Britain’s prime minister, mired in a stalemate over Brexit, relented just enough to help sterling claw higher but the mood remained distinctly ‘risk off’ regardless.

That helped strengthen the safe-haven Japanese yen and Swiss franc while higher-yielding currencies like the Australian and New Zealand dollars fell.

US stock index futures were pointing to a more than 1 per cent fall for Wall Streets main markets later. Digger maker Caterpillar’s shares fell 5.4 per cent in premarket moves after it blamed US tariffs for rising costs, while 3M slumped seven per cent after missing analysts estimates.

Markets were also digesting Turkish President Tayyip Erdogan’s comments on the killing of Saudi Arabian journalist Jamal Khashoggi at a Saudi consulate in Istanbul this month.

Investors worry that may lead to Saudi retaliation through crude oil, although a Saudi pledge to play a “responsible role” and keep markets supplied held down crude prices yesterday.

Front-month Brent crude oil futures were at $79.51 a barrel, down 0.4 per cent. US West Texas Intermediate crude futures were at $69.12 a barrel, dropping 0.35 per cent.

Asia’s overnight tumble gave back some of the ground the region had clawed back over the last two sessions. MSCI’s broadest index of Asian shares dropped two per cent to a one-and-a-half-year low, with declines in many of the region’s heavyweight bourses even more pronounced.

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