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JOHANNESBURG -  South Africa’s rand tumbled in mid-morning trade on Tuesday as political turmoil in Italy hit global risk appetite hard, stoking a selloff in emerging market currencies and stocks as investors to looked to buy safe-haven assets.

At 1050 GMT the rand was 1.6 percent weaker at 12.6625 from an opening level of 12.4550, erasing the small gains eked out in the previous session following S&P Global Ratings Friday decision to keep the rating steady.

Italy’s anti-establishment 5-Star and League parties abandoned plans to form a government at the weekend. Investors are now concerned the crisis could trigger an economic slowdown in the euro-area, with implications for demand for emerging market goods and services.

“We saw the rand weaken already during Asian trade on the back of Italian default concerns and that’s led to widespread risk aversion. Stocks are also lower and the dollar has strengthened across the board,” said senior trader at Standard Bank Oliver Alwar.

The index measuring the greenback index against a basket of major currencies was up 0.85 percent. The euro was down 0.65 percent.

The rand led the E.M. currency slide, while other big fallers included India’s rupee and Russia’s rouble , which both slipped 0.8 percent.

“While local fundamentals have improved, over the past two months the rand has really been trading on external factors. We’ve seen the capitulation in Turkey and Brazil and before that the U.S.-China trade wars. That’s what’s been driving the rand,” Alwar said.

Bonds also tanked, with the yield on the benchmark 2026 paper rising 10 basis points to 8.54 percent.

Stocks were dragged lower by Steinhoff Africa Retail (STAR) after it said it was slowing its African expansion and that it would not declare an interim dividend.

At 0945 GMT, its share price was down over 6 percent to 15.85 rand.

Overall, the benchmark Top-40 index was 1.38 percent lower at 49.851.05 while the wider All-share index had shed 1.23 percent to 56,160.70.

- REUTERS