EUROPE MARKETS: Europe Stocks Rise After Italy Election Polls

By Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- Italy's benchmark stock index ended higher on Monday following a roller-coaster ride as investors considered various reports about the likely outcome of the nation's general election.

Most other European benchmark indexes also posted gains.

Italy's FTSE MIB index climbed 118.71 points, or 0.7%, to finish at 16,351.99.

Italians voted in a general election on Sunday and Monday, with investors eagerly awaiting the results to see if Italy can manage to form a stable and effective government that will continue the austerity agenda now in place.

Exit polls from the election on Monday pointed to a lead for the center-left bloc of Pier Luigi Bersani. That news initially buoyed the Italian stock index to an intraday high of 16,883.31, but it pared gains after media reports said that an early vote count showed that the center-right group of former Prime Minister Silvio Berlusconi was leading in the Senate race.

The outcome of the election thus remains uncertain until all votes are counted and official results are announced.

The pan-European Stoxx 600 index slipped 0.1% to end at 288.40, though most other country-specific indexes gained.

"Leading up to the Italian election many investors were also closing out their short positions last week and there is a continuation of that today," said Predrag Dukic, senior equity sales trader at CM Capital Markets.

"Markets are pricing in a more stable center-left leaning and euro-friendly coalition, and should we see a surprise, we could obviously see a very different afternoon," he said.

Leading up to the election, both Italian and European stock and bond markets had been shaky on worries that a strong showing by Berlusconi would derail Italy from its current reformist drive.

For the broader European stock markets, most indexes started out on a strong footing, boosted by a positive trading session in Asia. Japanese shares soared to the highest closing level since September 2008, following reports that Asian Development Bank chief Haruhiko Kuroda could be the country's next central bank governor. .

Germany's DAX 30 index rose 1.5% to 7,773.19.

Shares of Deutsche Boerse AG rallied 5.6%. Bloomberg News reported that CME Group Inc. (CME) had approached the German exchange about a tie-up, but Deutsche Börse said it is not in merger talks with CME.

Shares of K+S AG gained 2.6% after Citigroup lifted the chemicals firm to buy from neutral.

France's CAC 40 index rose 0.4% to 3,721.33, with shares of Vivendi SA up 3.2%. French TV BFM reported that private-equity-owned French cable operator Numericable is preparing a cash offer for Vivendi's telecom operator SFR. A representative from Vivendi said that "SFR is not for sale". .

The U.K.'s FTSE 100 index gained 0.3% to 6,355.37, even after Moody's Investors Service late Friday slashed the country's credit rating to Aa1 from Aaa. .

Pearson PLC was the biggest decliner in the FTSE 100, with its shares down 3.7% after the publishing firm said it expected tough trading conditions and structural industry changes to continue in 2013.

BP PLC (BP) rose 1.6% after a report in The Wall Street Journal said that the U.S. Justice Department and Gulf Coast states were considering offering the oil major a deal in which BP would pay $16 billion to settle civil claims related to the 2010 Deepwater Horizon accident. A representative from BP declined to comment.

Shares of Reckitt Benckiser PLC slumped 3% after the consumer-goods firm said it was disappointed with the U.S. Food and Drug Administration's decision to deny a citizen's petition filed by the RB Pharmaceuticals business. .

Among other notable movers in Europe, shares of Nokia Corp. (NOK) gained 1%, as the handset maker launched new Windows smartphones in the midrange and lower price segments in an effort to boost sales. .

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