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Asia-Pacific equities were mostly lower in early trading on Tuesday as the political crisis in Italy worsened, investors favoured government bonds and the yen strengthened. 

Among the region’s major benchmarks, the Topix index in Tokyo and the Kospi in Seoul each fell 0.6 per cent, while Hong Kong’s Hang Seng dropped 0.5 per cent. In Sydney, the S&P/ASX 200 clung to positive territory, up 0.3 per cent. 

The weak equities sentiment came after Italian bonds and equities sold off on Monday as a fresh election appeared likely in the eurozone’s third-largest economy.

On Tuesday, yields on US 10-year Treasuries – which fall when prices rise – were down 5 basis points at 2.886 per cent. Yields have now fallen 24 basis points from a seven-year high of 3.1261 on May 18.

Japanese stocks saw further pressure from a firmer yen. The currency - traditionally a haven at times of geopolitical uncertainty – firmed as much as 0.5 per cent to ¥108.9 per dollar, and was track for its strongest close since April 25. 

Oil-linked stocks were mostly steady after posting steep declines on Monday as Brent crude looked set to snap a three-day slide on Tuesday. The S&P/ASX 200 Energy index in Sydney was up 0.2 per cent while the energy segment on Tokyo’s Topix rose 0.4 per cent.

While the impact on Asian markets from political uncertainties coming from Italy and Spain was “likely to be limited”, investors will be looking at the oil price and US bond yields “for signs whether the recent market pressure on emerging markets would ease”, JPMorgan Asset Management strategist Tai Hui said.

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