UK stocks : Euro Stock 50 down 3.1%
No group managed to secure a majority in the Italian parliament, heralding weeks of political uncertainty and raising the prospect of a government of sworn enemies - the centre right led by former prime minister Silvio Berlusconi and the centre left under Pier Luigi Bersani.
"In the medium term we think that Italy is unlikely to abandon reforms or leave the euro, but the politics before then could turn into a game of chicken. And equity markets really hate games of chicken," said Derry Pickford, macro analyst at investment manager Ashburton.
Italy's benchmark FTSE MIB index sank 4.9 percent to 15,552.20 points, posting its biggest daily fall in nearly a year and with all but two of its 40 companies in the red.
The EuroSTOXX 50 index closed down 3.1 percent at 2,570.52 points, its lowest finish since Nov. 28. The move extends the euro zone blue chip index's retreat from an 18-month high of 2,754.80 points hit at the end of January.
The broader, pan-European FTSEurofirst 300 fell 1.4 percent to 1,150.25 points.
"It introduces a whole range of uncertainty at a time when the markets were quite toppy anyway and were probably ready for some sort of correction," said Paul Jackson, strategist at Societe Generale.
Worries about a new flare-up in the euro zone's debt crisis fed through
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