EUROPE MARKETS: Europe Stocks Rally After Italy Election Polls

By Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- Italian stocks rallied on Monday after exit polls from the country's general election put the center-left in the lead.

The Stoxx Europe 600 index gained 0.4% to 289.80, on track for a second straight session of gains.

The index was, however, flat for the month of February, as worries over the elections in Italy and concerns that the U.S. Federal Reserve is mulling a quantitative-easing exit strategy kept investors from continuing the early 2013-rally. For the year so far, the Stoxx 600 is still up 3.5%.

Monday's positive moves added to a 1.3% gain from Friday, when investors cheered upbeat German data.

"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 in Madrid.

"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.

Italy's FTSE MIB index extended gains in afternoon action, jumping 4% to 16,870.82, after first exit polls were published. Polls on SkyTG24 placed center-left leader Pier Luigi Bersani ahead of former Prime Minister Silvio Berlusconi, easing fears of a fragmented government. A group led by Prime Minister Mario Monti was on track to win 21 seats, the exit polls showed, pointing the way toward an upper-house alliance between Bersani and Monti.

Leading up to the election, both Italian and European stock and bond markets had been shaky in weeks leading up to the elections on worries that a strong result from Berlusconi would derail the country 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. .

Among other country-specific indexes, Germany's DAX 30 index jumped 2.4% to 7,845.03.

Shares of Deutsche Boerse AG gained 4%. 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 2.9%, after Citigroup lifted the chemicals firm to buy from neutral.

France's CAC 40 index rose 1.9% to 3,777.01, with shares of Vivendi SA up 4.1%. 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.'sFTSE 100 index gained 0.6% to 6,370.33, even after Moody's Investors Service late Friday slashed the country's credit rating to Aa1 from Aaa. .

BP PLC (BP) rose 2.2% after a report in The Wall Street Journal 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 3.5% 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) added 2.8%, 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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