Sentiment weakened on fears that the Italian election could lead to a political gridlock.
The run of economic data was also lacklustre, although only minor data was released. The Dow and S&P500 fell 1.6%, while the Nasdaq fell 1.4%.
US treasuries rose (yields fell) which saw 10-year yields fall to a one-month low. Demand for bonds was boosted by concern about the outcome from the Italian election.
However, the reaction in Italian bond markets was muted. Italian ten-year government bond yields rose just four basis points.
Risk aversion saw the US dollar index edge higher. Meanwhile, the euro fell to its lowest in six weeks, weighed down by political concerns in Italy. Lower risk appetite had limited impact on the Australian dollar, which was little changed at around 1.029.
Commodity prices were higher, although uncertainty around Europe limited gains. Oil prices were supported by Chinese data revealing a jump in oil imports. Euro zone fears boosted the safe-haven appeal of gold.
No domestic data to report.
The flash reading on China's HSBC manufacturing PMI showed it fell to 50.4 in February, from a two-year high of 52.3 in January. This was the lowest reading since October last year, although it remains above the 50 level, indicating expansion in manufacturing activity.
Projections for the Italian election are forecasting a win for Bersani's party winning the lower house, but Berlusconi ahead in the Senate.
Such an outcome would lead to an ungovernable situation and potentially trigger a new election. It provides uncertainty about whether Italy is able to implement necessary economic reforms.
UK mortgage lending slowed from 33.4k new loans in December to 32.2k in January according to BBA data.
The Dallas Fed factory index slipped from 5.5 to 2.2 in February, more than reversing the gain in January, but remaining positive for the third month running.
This follows contractionary readings in seven of the eight previous months. The detail showed production, orders and jobs all recording slower growth in February.
The Chicago Fed national activity indicator slowed from 0.25 to -0.32 in January, and indicates a softer overall activity picture than in November to December.
Please read the disclaimer below (to enlarge, press ctrl-+ on modern browsers)
The information contained in this report (the Information) is provided for, and is only to be used by, persons in Australia. The information may not comply with the laws of another jurisdiction. The Information is general in nature and does not take into account the particular investment objectives or financial situation of any potential reader. It does not constitute, and should not be relied on as, financial or investment advice or recommendations (expressed or implied) and is not an invitation to take up securities or other financial products or services. No decision should be made on the basis of the Information without first seeking expert financial advice. For persons with whom St.George has a contract to supply Information, the supply of the Information is made under that contract and St.George's agreed terms of supply apply. St.George does not represent or guarantee that the Information is accurate or free from errors or omissions and St.George disclaims any duty of care in relation to the Information and liability for any reliance on investment decisions made using the Information. The Information is subject to change. Terms, conditions and any fees apply to St. George products and details are available. St.George or its officers, agents or employees (including persons involved in preparation of the Information) may have financial interests in the markets discussed in the Information. St.George owns copyright in the Information unless otherwise indicated. The Information should not be reproduced, distributed, linked or transmitted without the written consent of St.George.
Update your news preferences and get the latest news delivered to your inbox.