Japanese stocks plunged nearly 3 per cent to the lowest level in five weeks Thursday after an overnight sell-off on Wall Street and European markets as Italy came to the centre of the euro-zone debt crisis.

The benchmark Nikkei 225 Stock Average lost 254.64 points, or 2.91 per cent, to trade at 8,500.8 while the broader-based Topix index was down 19.1 points, or 2.55 per cent, at 730.3.

Both the Nikkei and Topix dropped further in the afternoon as other Asian markets fell sharply. By mid-afternoon, Hong Kong’s Hang Seng Index had plunged 4.33 per cent and South Korea’s Kospi Index had plummeted 3.45 per cent.

The Dow Jones Industrial Average lost 3.2 per cent overnight as the yield on Italy’s 10-year bonds at one point surged to nearly 7.5 per cent.

Economists see 7 per cent as an important threshold. Crossing it has previously pushed Greece, Ireland and Portugal to seek bailouts.

Japan’s key machinery orders declined a seasonally adjusted 8.2 per cent in September from the previous month, due to sharp drops in the telecommunications equipment and automotive sectors, the government said.

In Tokyo, on currency markets at 3 pm (0600 GMT), the dollar traded at 77.67—69 yen, up from Wednesday’s 5 pm quote of 77.58—60 yen.

The euro traded at 1.3544—3546 dollars, down from 1.3791—3793 dollars Wednesday, and at 105.22—23 yen, down from 107.00—02 yen.

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