* Cost of insuring Italian debt at record, euro ETFs fall
* Financial stocks sell off
* Chinese inflation hits 3-year high
* Indexes off: Dow 0.9 pct, S&P 1.1 pct, Nasdaq 1 pct
* For up-to-the-minute market news see [STXNEWS/US] (Updates to early morning)
By Edward Krudy
NEW YORK, July 11 (Reuters) - Wall Street stocks sank on Monday as fears about Europe's debt crisis and the global economy sent a shudder through markets and overshadowed the start of the U.S. earnings season.
Renewed concerns that Europe's debt crisis would spread, an increase in Chinese inflation and an impasse in budget talks in Washington converged to jolt investors. The news came after Friday's abysmal U.S. jobs report shocked markets.
U.S. exchange traded funds tracking European equity markets
came under heavy selling pressure. The IShares MSCI Italy Index
Fund
"In the short term, in terms of worries -- not actual events but worries --it's a little bit of a perfect storm for investors," said Oliver Pursche, president at Gary Goldberg Financial Services in Suffern, New York.
Banks and other economically sensitive stocks fell. Bank of
America Corp
The Dow Jones industrial average <.DJI> dropped 114.13 points, or 0.90 percent, to 12,543.07. The Standard & Poor's 500 Index <.SPX> fell 14.88 points, or 1.11 percent, to 1,328.92. The Nasdaq Composite Index <.IXIC> lost 29.04 points, or 1.02 percent, to 2,830.77.
Global equity markets fell, the euro slid more than 1 percent and the cost of insuring Italian debt jumped to a record amid fears of contagion in Europe's debt markets and reports some European Union leaders were considering allowing a selective default by Greece. For details, see [ID:nL6E7IB090].
Alcoa Inc