Stock markets across the world headed south after Italy paid dearly to borrow money, reflecting investors' doubts over its shaky finances and the future of the euro zone.
Britain's FTSE 100 fell 0.4 per cent, France's CAC 40 slid 0.5 per cent, Germany's DAX inched 0.3 per cent lower. Japan's Nikkei edged 0.1 per cent lower and Hong Kong's Hang Seng lost 1.4 per cent.
Dow futures were down 57 points, or 0.5 per cent, at 11,177. S&P 500 futures fell 6.3 points, or 0.5 per cent, to 1,153.60.
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Italy sold 8-billion euros of six-month treasury bills at a rate of 6.504 per cent, the highest since August, 1997. Rome paid 4.628 per cent in the previous auction in October. It is a sign that Italy's new technocratic government faces an uphill battle to convince the markets it can control its massive debts.
After the auction, Italy's 10-year yield spiked 0.34 percentage point to 7.30 per cent — above the 7 per cent threshold that is widely considered unsustainable in the long-run and eventually forced Greece, Ireland and Portugal had to seek financial bailouts.
Traders in the U.S. were bracing for a crucial test — Black Friday, the day that kicks off the holiday shopping season and provides a pulse-check of retail spending in the world's No. 1 economy.
Adding to negative sentiment was Moody's downgrading of Hungary's credit rating to junk status. Hungary, which last week asked the International Monetary Fund and the European Union for possible financial help, is feeling the impact of the euro zone debt crisis.
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U.S. crude for January delivery dipped 80 cents to $95.37 (U.S.) a barrel in electronic trading on the New York Mercantile Exchange.
Gold fell $14.80 to $1,684 an ounce.
The Canadian dollar fell to 95.18 U.S. cents.