Markets steady following Italian election fallout

Stocks around the world took a battering as the Italian election results failed to deliver a knockout victory for any one party, or group of parties. Viewed as a vote against austerity and the political establishment, the results highlighted the scale of discontent in a country that is crucial for the future of the euro.

“After a fraught couple of days, markets are looking a little more relaxed,” said Mike McCudden, head of derivatives at Interactive Investor.

Italy's FTSE MIB was the worst-hit index Tuesday, ending the day nearly 5 percent lower. It's still falling Wednesday though not at the same rate, as negotiations take place behind the scenes into how a government can be cobbled together. The index was 0.5 percent lower at 15,474.

Elsewhere in Europe, the FTSE 100 index of leading British shares was up 0.3 percent at 6,289 while Germany's DAX rose the same rate to 7,617. The CAC-40 in France was 0.6 percent higher at 3,641.

Wall Street was poised for a flat opening after a recovery on Tuesday — U.S. stocks bore the brunt of the selling on Monday when the first Italian election results starting coming through, ending the day with their worst performance of the year.

The recovery on Tuesday came after some strong U.S. economic figures and a suggestion from Fed Chairman Ben Bernanke that the central bank's low-rate policies currently pose little risk of causing runaway inflation or a stock market bubble. That eased recent jitters the Fed would start to withdraw its super easy monetary policy sooner than many investors think.

The dollar has had a strong week against the euro, particularly in the wake of the Italian election results. However, Europe's single currency got a lift Wednesday after a survey showed economic sentiment in the 17-country eurozone rising by more than anticipated in February.

The European Commission, the EU's executive arm, said its main economic sentiment indicator for the eurozone rose to 91.1 in February, from 89.5 the previous month. The expectation in the markets was for a far more modest rise to 89.9.

That helped the euro clamber above US$1.31 again for a brief while. Late morning London time, it was 0.2 percent higher at US$1.3090.

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