Stocks, euro tumble as crisis envelops Italy

NEW YORK, November 9, 2011 (AFP) - Worries that an Italian financial collapse could crack the eurozone sent markets tumbling Wednesday, with losses topping three percent in US trade.



A selloff of Italian government bonds sent the yields to new highs above 7.



4 percent, a level seen unsustainable for the finances of the European Union's fourth largest economy.

Even though Prime Minister Silvio Berlusconi pledged to resign and leave politics when the country is firmly committed to a credible reform plan, markets saw the future as still unclear.

Portugal, Ireland and Greece, all much smaller economies, were forced to seek bailouts when their debt hit yields at that level, and some analysts questioned whether the 17 member eurozone could handle such a large rescue like Italy.

Along with the still-unsettled politics of Greece -- the original epicenter of the crisis -- the turmoil sent the euro sinking by more than two US cents to .

3544 at around 2200 GMT, from .

3773 a day earlier.

Traders pushed into US dollars and US bonds, while shunning any risk.

"The Italian bond market is in distress," said Kathleen Brooks, an analyst at traders Forex.com.

"Although Berlus