In the run-up to the Italian election a high number of voters were undecided.

Berlusconi’s coalition was polling around 27% but it looks like he got a slight bump to 30-31%. The big swing went to Grill’s Five Star anti-establishment party. They had been polling around 16% but may have won 25% of the vote, taking most of the gains from Bersani. With these numbers, they are likely to be the largest single party in the Senate.

This outcome was completely unexpected and markets hate uncertainty.

The euro is in somewhat of a state of disbelief while Italian stocks have now gone negative and 10-year Italian yields are down only 6 bps after falling by as much as 26 bps.