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GLOBAL investors have returned to the edge of their seats as a knife-edge Italian election has raised fears the eurozone debt crisis could resurface.
Australia's share market lost 1 per cent on Tuesday after Italy's election saw disgraced PM Silvio Berlusconi locked in the lead with former comedian Beppe Grillo.
This stoked fears among investors and initially wiped 1.5 per cent from the value of the bourse. Despite staging a fightback through the day the bourse closed 1 per cent lower overall.
The jitters came as the Reserve Bank warned the cash rate could be used to offset the impact of a high Australian dollar.
These comments, and suggestions the RBA could intervene in currency markets if conditions demanded it, drove the dollar down to below US102.5¢.
Robert Rennie, Westpac's chief currency strategist, said Italy's deadlocked election result would rattle financial markets because it heralded a deterioration in European politics.
"The idea that Berlusconi was finished will now need to be rethought,'' he said.
Read more: http://www.smh.com.au/business/italian-election-deadlock-spooks-market-20130226-2f42p.html#ixzz2M2oEYKoX
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