Markets braced for Italy result

Investors are awaiting the outcome of an Italian election that could trigger a sell-off in stocks and bonds and renew concerns about the euro if the polls bring an unstable government.

Opinion polls have suggested the centre-left Democratic Party (PD) of Pierluigi Bersani could secure a narrow victory in the recession-hit country.

But the rise of anti-establishment comedian Beppe Grillo's 5-Star Movement and the impressive comeback of centre-right leader Silvio Berlusconi have cast doubt over Mr Bersani's ability to govern even if he forms a coalition with the centrist party of outgoing technocrat prime minister Mario Monti.

Stock gains in Asia helped lift the future contract on Italy's benchmark 10-year BPT bond.

"Asian gains are providing support and some investors are already betting on a relief rally if the centre-left wins," a derivatives trader said.

"But it's too early to tell and we can expect nervousness to emerge at a debt sale later today."

The Italian stock market was expected to open higher on the back of stronger European index futures.

"The stock futures are positive but I don't expect anything significant on the Italian market until the exit polls come out," a Milan trader said.

By 08.03 GMT, the FTSEurofirst 300 was up 1.97 points, or 0.2 per cent at 1,167.55, in tandem with overnight gains in Asia and a bullish finish in the US on Friday.

The euro zone blue chip index climbed 1 per cent to around 2,656 points, extending its bounce off near three-month lows hit last Thursday.

Reuters