Italian road, building shares cheer Berlusconi win

MILAN (Reuters) - Shares in Italian road and building companies surged on Tuesday on hopes of renewed spending with Silvio Berlusconi's election as prime minister, but his Mediaset broadcaster fell after a downgrade.

Shares in ailing flag carrier Alitalia jumped 18 percent by the end of the session, as the market bet on a new solution after Air France-KLM broke off privatization talks this month. Berlusconi vowed on Tuesday to do everything necessary to keep it flying.

Berlusconi, a conservative media tycoon and one of Italy's richest men, was elected to a third term as prime minister with a strong mandate in elections held on Sunday and Monday.

On Tuesday he repeated campaign promises to cut taxes and sell public property to trim a crushing public debt burden.

He has also vowed infrastructure spending to boost the European Union's fourth-biggest economy, including revived plans for the world's biggest suspension bridge to link mainland Italy and Sicily.

In a research note, investment bank Abaxbank said, "With the centre-right's election win ... we believe that all shares linked to infrastructure and those in niche sectors with strong business talent will mostly end up having a strong advantage."

However, insurers and banks would probably suffer, since Giulio Tremonti, who is tipped to be the next economy minister, would like to exclude them from cuts in corporate tax, Abaxbank said.

Italy's largest builder Impregilo rose 4.6 percent on Tuesday, largely outperforming a 0.8 percent rise in the DJ Stoxx index of European construction companies.

Impregilo had headed a consortium to build the Sicily bridge under Berlusconi's 2001-2006 government, but the outgoing centre-left government scrapped the plan.

Construction company Astaldi also gained 3.3 percent.

CONCRETE HOPES

Among toll-road operators, Atlantia rose 6.09 percent, and Autostrada Torino Milano was up 2.7 percent. The previous government had thwarted a takeover of Atlantia by Spain's Abertis.

Mediaset, which had risen more than 10 percent since mid-March on hopes of a Berlusconi win, sank after early gains and closed down 3.96 percent.

Cazenove downgraded the stock to "underperform" from "neutral". It cited Italy's slowing economy and increasing penetration of digital terrestrial television, which is cutting into audiences.

Berlusconi's election will "put paid to any remaining left-wing hopes that new legislation might be passed that would make life more difficult for incumbent commercial media companies such as Mediaset. However, that looks to be where the positives end," it said.

UBS said Mediaset was facing the same economic risks as competitors, with few regulatory gains likely.

Publishing company Mondadori, controlled by Berlusconi's Fininvest holding company, ended down about 1.4 percent.

Asset manager Mediolanum, which is partly owned by Fininvest, closed down 0.56 percent.

The spread between Italian 10-year bonds and benchmark German Bunds widened to 54 basis points on Tuesday, its biggest gap since March 27.

The move is in line with bonds from other so-called peripheral European countries and is unlikely to be linked to the election, traders said.

(Reporting by Ian Simpson; additional reporting by Andrea Mandala; Editing by Andrew Hurst/Will Waterman)