Fractious Italian politics sent tremors through global markets earlier this year. Investors have been hammering European stocks and bonds ever since, betting more trouble lies ahead. The yield gap between Italian and German debt -- which reflects the extra premium investors demand for holding Italian assets over their safer European counterparts -- in August reached a five-year high, according to Tradeweb. Yields on 10-year Italian bonds have climbed above 3% to their highest levels since 2014. European equity funds, meanwhile, have posted outflows for 25- straight weeks, according to fund-tracker EPFR Global, while ownership of euro-area stocks in global portfolios has fallen to its lowest since the European Central Bank launched its massive bond-buying program in January 2015, according to data from the Institute of International Finance. "Italy has hit sentiment hard," said Richard Saldanha, an equity fund manager at Aviva Investors. Investors fear Italy's government could announce a budget this fall that puts the country's debt on an unsustainable course and so amplify tensions with Brussels.via