LONDON, Feb 25 (Reuters) - Uncertainty over the Italian election outcome dragged European indexes off their highs on concern that an unclear outcome could hamper the country's effort to implement economic reforms.
The pan-European FTSEurofirst 300 index provisionally closed up 0.1 percent at 1,166.73 points, off a high of 1,174.24 points.
If no stable government is formed, voters could be forced to return to the polls, thereby fuelling short-term market volatility.
Kevin Lilley, European equity fund manager at Old Mutual Asset Managers, said he had sold off bank stocks in the run-up to the Italian vote and could sell more equities if the centre-right party headed by Silvio Berlusconi won the Senate.
"It will be 'risk-off' if Berlusconi wins. Italian bond yields will go up in the short-term," he said.
Toby Campbell-Gray, head of trading at Tavira Securities, said European equity markets would be choppy while the Italian situation remained unclear.
"The market's going to become a little bit more volatile until the conclusion of the vote," he said.