Markets buoyant ahead of Italian election results

A garbage bin with TV screens on the side show the numbers for early morning trading on the stock exchange in the City of London, Monday, Feb. 25, 2013. The British pound is recovering after dropping against the world's leading currencies as markets reacted to a downgrade of the U.K.'s cherished triple-A credit rating. The pound was in focus in the wake of last Friday's decision by Moody's to downgrade the U.K.'s credit rating by one notch from the top AAA to AA1. The agency says sluggish growth and rising debt are weakening the British economy's outlook. (AP Photo/Alastair Grant)
Alastair Grant

LONDON Markets roared ahead Monday as the positive momentum that has marked 2013 reestablished itself despite the downgrade of Britain's credit rating and uncertainty over Italian election results.

Investor sentiment has recovered from last Thursday, when it was hurt by concerns over the possible end of super-easy U.S. monetary policy.

The rebound was led by Tokyo, where stocks surged on Monday on reports the prime minister's pick for central bank governor will be a strong advocate of loose monetary policy aimed at reviving the moribund economy.

The positive momentum seen during the Asian trading session carried through into Europe, even after Moody's stripped Britain of its triple-A credit rating and as Italians headed to the polls on the final day of a general election that has proven to be closer than many thought.

A convincing victory by conservative candidate Nicos Anastasiades in Cyprus' presidential election has helped ease concerns that the country might not clinch a bailout deal with international creditors.

Though one electoral concern has been eased, investors remain cautious over the outcome in Italy given the country's debt problems. Results are expected to start emerging late in the European session.

"This has a significant impact upon the strength of the eurozone going forward given the size and significant of the Italian economy," said Joshua Maloney, an analyst at Alpari.

Investors in Italy were showing few concerns, as Milan's FTSE MIB raced up 2.2 percent to 16,592. Elsewhere in Europe, the FTSE 100 index of leading British shares was up 0.8 percent at 6,386 while Germany's DAX surged 2.5 percent to 7,855. The CAC-40 in France was 1.8 percent higher at 3,775.

The euro was also firm, trading 0.4 percent higher at $1.3268 while the British pound recovered after hitting its lowest level against the U.S. dollar since July 2010. It was 0.2 percent up on the day at $1.5133.

Wall Street was poised for a higher opening, with Dow futures up 0.4 percent and the broader S&P 500 futures 0.5 percent higher.

It's a particularly busy week on the U.S. economic news front, with investors awaiting a raft of data as well as remarks from Federal Reserve chairman Ben Bernanke. Last week, the minutes from the Fed's last policy meeting showed concern over the central bank's monetary stimulus, stoking jitters in the markets. Meanwhile, lawmakers in Congress are also grappling over the budget again.

Earlier in Asia, Japan's benchmark Nikkei 225 surged 2.4 percent to end at 11,662.52 while the yen dropped further against the dollar after local news outlets reported that Prime Minister Shinzo Abe was preparing to nominate Haruhiko Kuroda as the next governor of the Bank of Japan.

Kuroda is an Oxford-educated former vice-minister of finance who is currently president of the Asian Development Bank. The 67-year-old is seen as someone who backs Abe's plan to jumpstart the world's third-largest economy by fighting deflation through monetary easing and hefty government spending.

"The market has become very excited over this news as he will be a market friendly choice," said Chris Weston of IG Markets.

Since the Asian session, the yen has recovered and the dollar was trading 0.6 percent lower at 93.77 yen. Earlier it had risen to 94.76 yen and near two and a half year highs.

Over the past few weeks the yen has fallen by around 20 percent and that's helped the Nikkei gain around 30 percent.

Elsewhere in Asia, Hong Kong's Hang Seng rose 0.2 percent to close at 22,820.08 while South Korea's Kospi ended 0.5 percent lower at 2,009.52.

In mainland China, the Shanghai Composite Index climbed 0.5 percent to close at 2,325.82 and the smaller Shenzhen Composite Index ended 0.8 percent higher at 955.79.

Oil prices tracked equities higher with the benchmark New York rate up $1.04 at $94.17 a barrel.