LONDON, Feb 26 European stocks were expected to open sharply lower on Tuesday as elections in Italy delivered a parliamentary deadlock that threatened to blow Europe's largest debtor off the reform path and rocked global markets. At 0729 GMT, futures for the Euro STOXX 50 were down 3.5, contracts on Germany's DAX were down 2.1 percent and futures for France's CAC fell 3.3 percent. Italy faced a political vacuum after a huge protest vote left no party or likely coalition with enough seats to form a majority in the upper house - the opposite of the stable result markets were hoping for and Italy desperately needed to tackle its economic and debt problems. Euro zone banking stocks, which are heavily exposed to the region's debt crisis, likely were to come under pressure as anti-austerity parties took more than 50 percent of the vote, sending the euro close to a seven-week low against the dollar. U.S.-listed shares in Italian bank Intesa Sanpaolo fell 4.9 percent overnight. German Bund futures jumped to a two-month high on Tuesday while equivalent Italian futures tumbled. Investors were set to monitor the spread between both bonds' yields as a gauge of investor sentiment towards Italian public debt. "If the spread widens, banks, with all the public debt they own, are going to fall heavily," a trader in Milan said. "But I don't think they will allow the spread to widen (to 2011 levels), with some help from the European Central Bank." Italy's borrowing costs have come down in recent months, helped by the promise of European Central Bank support but the election result confirmed fears that it would not produce a government strong enough to implement effective reforms. The Italian vote also saw the U.S. S&P 500 index suffer the biggest percentage drop since November and the CBOE Volatility Index, a globally watched barometer of equity investor fear, surge 34 percent, its biggest jump since August 2011. Nick Xanders, who directs European equity strategy at BTIG, recommended investors to buy volatility to protect themselves from "free fallin(g)" markets as the VIX was still inexpensive and trading at a discount to its euro zone counterpart, the Euro STOXX 50 volatility index, or VSTOXX. The VIX traded at 18 points, down from a peak of 27 hit last summer, while the VSTOXX was at 22, from a 2012 high of 38. The Euro STOXX 50 has risen roughly 2.4 percent in the past two sessions, rebounding from a two-month low as investors positioned for a favourable election outcome in Italy and welcomed signs global central banks will continue to provide stimulus. Corporate updates confirmed the outlook for European companies remained mixed and underscored the impact of global debt-reduction measures on profits. Fresenius Medical Care, the world's largest dialysis provider, said it expected its 2013 net income after minorities to rise only slightly this year as lawmakers in the United States, its most important market, plan to take austerity measures. BASF, the world's largest chemicals company by sales, proposed a slightly higher-than-expected annual dividend but its fourth-quarter earnings before interest and tax fell just short of analyst estimates. -------------------------------------------------------------------------------- MARKET SNAPSHOT AT 0731 GMT: LAST PCT CHG NET CHG S&P 500 1,487.85 -1.83 % -27.75 NIKKEI 11,398.81 -2.26 % -263.71 MSCI ASIA EX-JP 546.93 -1.21 % -6.71 EUR/USD 1.3028 -0.26 % -0.0034 USD/JPY 91.45 -0.37 % -0.3400 10-YR US TSY 1.838 -- -0.03 YLD 10-YR BUND YLD 1.463 -- -0.12 SPOT GOLD $1,588.70 -0.32 % -$5.16 US CRUDE $92.21 -0.97 % -0.90 > GLOBAL MARKETS-Asia shares decline on deadlocked Italy election > Wall St trips and falls on cloudy Italian election > Nikkei drops on Italy election deadlock > Treasuries' yields dip on Italy election uncertainty > Euro sags to near 7-week low vs. dollar after messy Italy vote > Gold rises as uncertain Italy vote sparks safe-haven demand > LME copper climbs on buying ahead of China seasonal pick-up > Brent hits 1-mth low below $114 on Italy vote uncertainty COMPANY NEWS BASF Indicated 2.3 pct lower BASF said it aimed to increase revenue and operating profit again this year, after fourth-quarter earnings before interest and tax (EBIT), adjusted for one-off items, rose 18 percent to 1.8 billion euros, just short of the 1.86 billion euro average estimate in a Reuters poll of analysts. Poll: FRESENIUS MEDICAL CARE Indicated 0.7 percent lower FMC said it sees 2013 net income attributable to shareholders at between $1.1-$1.2 billion, a growth of 5-15 percent over last year's level when excluding a $140 million one-off investment gain booked in 2012. Poll: FRESENIUS SE & CO. Indicated 0.1 percent higher The company proposed a dividend slightly above expectations, saying it had put in place a new payout policy linked to adjusted earnings per share growth. Adjusted net income in 2012 rose 22 percent to 938 million euros, ahead of the average estimate of 930 million euros in a Reuters poll. Poll BAYER Indicated 1.4 percent lower Germany's largest drugmaker is due to announce its dividend proposal for 2012. Analyst expect 1.82 eur/shr on average. The U.S. Food and Drug Administration said on Monday it has approved Bayer's drug Stivarga for the treatment of a rare type of gastrointestinal tract cancer. Related news EADS Indicated 1.9 percent lower The aerospace group will end its joint venture with Brazilian construction company Odebrecht after failing to win an order for surveillance systems. Related news PUMA Indicated 0.7 percent lower Pandora said a report in German monthly Manager Magazin that its CEO Bjoern Gulden would take the top job at Puma was wrong. Puma has yet to name a successor of CEO Franz Koch, who will quit at the end of March. Pandora is due to release full-year earnings on Tuesday. Related news SKY DEUTSCHLAND Indicated 0.6 percent lower CEO Brian Sullivan told daily Sueddeutsche Zeitung that the pay TV company aims to be profitable after tax "relatively soon". Related news REPSOL Repsol could agree sell its liquefied natural gas assets to Shell this week for between 1.5 billion and 1.7 billion euros, Expansion newspaper reported, citing financial sources. Shell was reported to be in the frame at the end of January. BANKS Spain's bank restructuring fund FROB, which is auctioning off rescued lender Catalunya Banc, could offer prospective bidders tax advantages to seal the sale, Cinco Dias newspaper reported. Top banks including Santander and BBVA have said they are studying the lender. NESTLE The world's biggest food group has agreed to buy U.S. medical foods company Pamlab, the latest in a string of recent acquisitions as the company expands in health and nutrition. For related news, click on IBERIA Spanish airline Iberia - part of International Airlines Group - could lose up to 3.5 million euros for every day its workers strike, according to preliminary internal estimates, Cinco Dias newspaper reported, citing sources close to the situation. Unions called three week-long strikes to protest against job cuts. NH HOTELES Hotel group NH has called a meeting with unions on March 11, to discuss options to improve its business, which could include making layoffs, news agency Efe reported.