In this Jan. 19, 2013 photo Pier Luigi Bersani and Umberto Ambrosoli meet in Milan, Italy. Lombardy, Italy's most populous and economically productive region, is a key battleground in the upcoming national elections, with the regional race not only likely to determine who can most reliably govern the euro zone's third-largest economy but also testing emerging political alliances. Polls show that the center-right coalition led by Silvio Berlusconi and the center-left forces backing Democratic Party leader Pier Luigi Bersani's bid for premier are neck-and-neck in Lombardy, geographically centered around the financial and fashion capital Milan, marking the first time in the Berlusconi era that the left has had such a strong showing in region where the media mogul made his mark. (AP Photo/Alessandro Treves, Lapresse) ITALY OUT
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In this Jan. 19, 2013 photo Pier Luigi Bersani and Umberto Ambrosoli meet in Milan, Italy. Lombardy, Italy's most populous and economically productive region, is a key battleground in the upcoming national elections, with the regional race not only likely to determine who can most reliably govern the euro zone's third-largest economy but also testing emerging political alliances. Polls show that the center-right coalition led by Silvio Berlusconi and the center-left forces backing Democratic Party leader Pier Luigi Bersani's bid for premier are neck-and-neck in Lombardy, geographically centered around the financial and fashion capital Milan, marking the first time in the Berlusconi era that the left has had such a strong showing in region where the media mogul made his mark. (AP Photo/Alessandro Treves, Lapresse) ITALY OUT
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In this Jan. 17, 2013 photo Northern League party's leader Roberto Maroni attends a TV show in Rome. Lombardy, Italy's most populous and economically productive region, is a key battleground in the upcoming national elections, with the regional race not only likely to determine who can most reliably govern the euro zone's third-largest economy but also testing emerging political alliances. Polls show that the center-right coalition led by Silvio Berlusconi and the center-left forces backing Democratic Party leader Pier Luigi Bersani's bid for premier are neck-and-neck in Lombardy, geographically centered around the financial and fashion capital Milan, marking the first time in the Berlusconi era that the left has had such a strong showing in region where the media mogul made his mark. (AP Photo/Roberto Monaldo, Lapresse) ITALY OUT
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In this Nov. 8, 2008 photo, Gabriele Albertini stands in front of the Milan gothic cathedral, Italy. Lombardy, Italy's most populous and economically productive region, is a key battleground in the upcoming national elections, with the regional race not only likely to determine who can most reliably govern the euro zone's third-largest economy but also testing emerging political alliances. Polls show that the center-right coalition led by Silvio Berlusconi and the center-left forces backing Democratic Party leader Pier Luigi Bersani's bid for premier are neck-and-neck in Lombardy, geographically centered around the financial and fashion capital Milan, marking the first time in the Berlusconi era that the left has had such a strong showing in region where the media mogul made his mark. Playing spoiler is former Milan Mayor Gabriele Albertini, who after defecting from Berlusconi's People of Liberty Party in a spat has aligned himself with Premier Mario Monti's centrist forces. (AP Photo/Luca Bruno)
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Former Italian premier Silvio Berlusconi smiles during a rally for the upcoming elections in Rome Friday, Jan. 25, 2013. Berlusconi outlined his latest "contract" with Italians on Friday as he pressed his latest comeback bid, promising a host of reforms and measures to give relief to Italians suffering through a deep recession and youth unemployment at a record 37 percent. (AP Photo/Alessandra Tarantino)
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The European Commissioner for Monetary Affairs Olli Rehn is surrounded by photographers and television cameras at the start of a a news conference in Madrid Monday Jan. 28, 2013. Battling to reduce a swollen deficit and avoid a bailout, the year-old conservative government has brought major financial and labor reforms and applied severe cutbacks in wages and spending but so far the economy has shown few signs of recovery. (AP Photo/Paul White)
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Italian Premier Mario Monti gestures as he speaks during a news conference in Rome, Sunday, Dec. 23, 2012. Italy's caretaker Premier Mario Monti said Sunday he won't run in February elections, but if political parties that back his anti-crisis agenda ask him to head the next government he would consider the offer. Monti ruled out heading any ticket himself, saying "I have no sympathy for 'personal' parties." At a news conference, Monti made clear he was spurning an offer from his predecessor Silvio Berlusconi to run on a center-right election ticket backed by the media mogul, citing Berlusconi's heavy criticism of his economic policies. (AP Photo/Alessandra Tarantino)
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Italian Premier Mario Monti arrives to take part in the Italian State TV RAI's show "In Mezz'ora" (In half an hour) in Rome, Sunday, Dec. 23, 2012. After keeping the country wondering for weeks, caretaker Premier Mario Monti on Sunday ruled out running in February elections, but offered to willingness to head the next government if political forces sharing his austerity and reform-focused agenda ask him to do so. Monti ruled out heading any ticket himself, saying "I have no sympathy for 'personal' parties." But he coyly made himself available to serve as premier while Italy works to shore up its finances and struggles to emerge from recession. (AP Photo/Mauro Scrobogna, Lapresse)
Overseas markets fall on Spain, Italy jitters
Global stock markets have seen their biggest losses so far this year, amid political uncertainty in Spain and Italy.
In the United States, stocks reversed after closing last week at a five-year high.
The mood was soured after figures showed that US factory orders were lower than expected in December.
There are also fresh concerns about stability in the eurozone, as Spain's prime minister Mariano Rajoy faces calls to resign over a corruption scandal. Mr Rajoy has denied the claims.
The Dow Jones Industrial Average fell 0.9 per cent to 13,880, the S&P 500 index closed 1.2 per cent lower at 1,496, and the technology focused Nasdaq Composite Index lost 1.5 per cent to 3,131.
In Europe, confidence was also shaken by the scandal in Spain, and there are concerns about the situation in Italy, as the former prime minister, Silvio Berlusconi, gains in popularity before elections this month.
A win by Mr Berlusconi could threaten the reforms introduced by the current government.
In London, the FTSE 100 fell 1.6 per cent to 6,247, the DAX in Germany dropped 2.5 per cent, and the CAC 40 in France shed 3 per cent.
Domestically, futures trade is pointing to losses at the start of the Australian session - the ASX SPI 200 index was down 35 points at 4,834.
On commodity markets, the spot gold price had risen to $US1,674.30 an ounce.
But West Texas crude oil dropped in line with stocks after a run of strong gains; it fell nearly 1.5 per cent to $US96.20 a barrel.
In currency trade, the Australian dollar was higher against the greenback and the yen; at 8:25am (AEDT) it was buying 104.3 US cents, 96.3 Japanese yen, 77.2 euro cents, 66.2 British pence and less than $NZ1.24.
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