Tokyo: Tokyo stocks fell Monday morning as Italian Prime Minister Matteo Renzi's resignation following a crushing referendum defeat sparked worries about political instability in the key eurozone country and beyond.
The euro briefly dived to 20-month lows against the dollar on the news, which also sparked demand for the safe-haven yen -- a negative for Japanese shares.
Investors largely shrugged off data released Friday that showed the US unemployment rate at a nine-year low in November, all but guaranteeing a Federal Reserve interest rate hike before the end of the year.
Concerns over political uncertainty are spreading "as news trickles out that those opposing reform are gaining the edge", said Yutaka Miura, a senior technical analyst at Mizuho Securities.
"An overheated rally in US equities and the dollar -- and the dip in the yen -- is taking a pause, causing Japanese stocks to trade slightly weaker," he told Bloomberg News.
Tokyo's benchmark Nikkei 225 index was down 0.64 per cent, or 117.01 points, at 18,309.07 by the break, while the Topix index of all first-section issues was off 0.73 per cent, or 10.86 points, at 1,467.12.
The euro slumped to $1.0506 at one point, its lowest since March 2015, but it later rebounded to $1.0553.
And the yen, which is often bought as a safe haven in times of uncertainty, picked up in early deals with the dollar fetching 112.88 yen, against 113.51 yen in New York on Friday. But the dollar also recovered to sit at 113.70 yen.
Renzi announced his resignation hours after losing a referendum on constitutional reform Sunday.
The defeat and Renzi's departure threatens to plunge Italy into a new phase of political uncertainty and possible economic turmoil.
Some analysts fear a deeper crisis of investor confidence that could derail a rescue scheme for the country's most indebted banks, triggering a wider financial crisis across the already struggling eurozone.
"(Renzi's) defeat in the face of populist moves will spawn concerns over the rest of Europe," said Yunosuke Ikeda, chief currency strategist at Nomura Securities in Tokyo.
"But given the fact that this had been predicted beforehand, it's not a surprise in the same way as the Brexit vote or (Donald) Trump's election victory.
"As Prime Minister Renzi has now resigned, some investors might think all the bad news is out now."
Panasonic was up 0.91 per cent at 1,215.5 yen after the Nikkei business daily reported that the electronics giant plans to purchase European automotive lighting company ZKW in a deal valued at about 100 billion yen.
Mobile game company DeNA fell again, dropping 4.56 per cent to 3,135 yen, as it suspended its information websites over rising concerns about the accuracy of medical articles on the sites.
Banking giant Mitsubishi UFJ sank 2.55 per cent at 707.6 yen and rival Mizuho Financial Group fell 1.51 percent to 208.4 yen, while Toyota was off 0.82 per cent at 6,631 yen.
