* FTSEurofirst 300 up 0.7 percent
* Investors eye win for pro-reform party in Italy
* Italian banks lead gainers
* Deutsche Borse leaps on M&A report
* Elan rallies on $6.6 mln bid approach
By David Brett
LONDON, Feb 25 (Reuters) - Italian banks were among the top
risers in Europe around midday on Monday as investors started to
bet on a centre-left victory a closely-fought general election,
seen as crucial to efforts to dig the euro zone out of crisis.
Opinion polls have suggested the pro-reform, centre-left
Democratic Party of Pierluigi Bersani could secure a narrow
victory in the recession-hit country, the euro zone's
"Everybody is expecting that the left wing will be the
winner of the election. It is not yet sure but it is in the
price," said Oliver Roth, head trader at Close Brothers Seydler.
Italy's benchmark index rallied 1.8 percent led by
banks such as Unicredit and Intesa SanPaolo
as concerns of a victory for former prime minister Silvio
One note of caution, however, were signs of a surge in
protest votes that added to the risk of an unstable outcome and
Italy's broader economic problems remain a huge challenge for
the incoming administration, whatever its makeup.
"In the short term ... only a hung Parliament ... has the
potential to rock the boat at this stage," said Nicola
Marinelli, fund manager at Glendevon King.
"Longer term is more challenging, because the Italian
(economic) problems that (former prime minister) Mario Monti had
just started to tackle are all still there."
Marinelli said he remained happy to hold some Italian assets
in the short-term, although he favoured corporate credit more
than government bonds.
Demand for Italy's state debt held firm at a sale on Monday
with the state's borrowing costs only slightly up from a month
earlier and lower than rates on secondary markets.
The more buoyant mood in Italy fed through to the broader
market where the FTSEurofirst 300 rose 8.21 points, 0.5
percent, to 1,173.79 by 1138 GMT.
Sentiment was also helped by more signs from the Federal
Reserve late last week that soothed concerns it may withdraw
economic stimulus sooner than previously expected. A broader
outlook for continuing ultra-easy policy in both Japan and the
United States continues to underpin markets.
And Britain's FTSE 100 also rallied 0.7 percent,
shrugging off the loss of the first of the country's triple-A
credit ratings late on Friday, which knocked both sterling and
UK government bond prices.
Berenberg Bank said the downgrade is likely to mean slightly
looser monetary and fiscal policy, which usually benefits
The cut weighed on the value of the pound, but that again
would be another boost for equities on London's blue chip index,
around 70 percent of which derive their earnings from outside
The euro zone's blue chip index climbed 1.9
percent to around 2,679, extending a bounce off near three-month
lows hit last Thursday. One technical analyst said gains should
continue if the index manages to close above resistance at
Germany's Dax, meanwhile, powered 2.3 percent
ahead, led by a 10.3 percent gain for Deutsche Boerse AG
after a Bloomberg report that it had been approached
by CME Group Inc., the world's largest futures exchange, to
consider beginning talks on a merger.
Irish drugmaker Elan Corporation gained 8.9 percent
after Investment firm Royalty Pharma made a $6.6 billion bid
approach to the firm.
On the down side, drug maker Reckitt Benckiser fell
4.1 percent after the U.S. Food and Drug Administration (FDA)
approved generic production of its heroin addiction treatment
Suboxone, rejecting a company petition on packaging.
British education and media group Pearson was the
top faller, down 5.6 percent after said it expects this year's
earnings to be flat on 2012.