European stocks had a bad day yesterday as Italy's inconclusive parliamentary election renewed concern that the country will dilute its austerity programme and trigger a fresh crisis inside the eurozone.
Italian shares led the retreat, with the FTSE MIB Index tumbling 4.9pc. Telecom Italia slumped to a 15-year low as contracts to protect against a default by the country's biggest phone company surged. SEB slid the most in four months after full-year profit missed estimates. BASF slid the most in nine months.
The Stoxx Europe 600 Index fell 1.3pc to close at 284.65 in London. More than seven shares dropped for every one that climbed.
Irish shares bucked the trend following better-than-expected results from CRH and Kerry, but Irish bonds endured a torrid session with yields on five-year bonds climbing 16 basis points to finish just a whisker below 3pc. Denmark was the only other country in western Europe where shares gained. Germany's DAX retreated 2.3pc, France's CAC 40 fell 2.6pc, and the UK's FTSE 100 slipped 1.3pc.
"Italy is almost ungovernable and sometimes we get a wake- up call about that," said Roberto Magnatantini at Banque SYZ in Geneva.
"I'm really not that optimistic about the ability of Italian politics to reinvent itself and Italians are deeply fed up and disillusioned."
Election results in Rome showed that pre-election favourite Pier Luigi Bersani won the lower house by less than a half a point.
Silvio Berlusconi, the former premier who has vowed to reverse austerity measures, won a blocking minority in the Senate. An Italian government requires a majority in both houses.
Italian 10-year government bond yields advanced 40 basis points to 4.89pc, heading for the biggest advance since 1993.
Italian market regulator Consob said it's discussing measures to control volatility by tightening limits on stock fluctuation and by holding volatility auctions, according to an official.
It banned short-selling on Banca Carige and Intesa Sanpaolo yesterday and again today.