Italy in mild disarray.

Italy's national elections have failed to deliver a decisive verdict this weekend, sending stocks to a six-month low, as voters shifted support to anti-establishment parties that could extend the country's prolonged political stagnation and hold back growth in the broader European region.

The anti-Brussels Five Star Movement, a relatively new political party founded by a former television comedian but now a political force in Europe's third-largest economy, is likely to have won the largest single vote share -- 33% -- in the Sunday vote, according to official projections, but won't gain enough seats to form a majority government. The center-right alliance known as Forza Italia, led by former Prime Minister Silvio Berlusconi, collected a higher portion of the vote, at 37%, but fractures inside the loose-collection of allies likely means it will be unable to either attempt to form a government itself of lead a move to combine with like-minded parties that could command a stable leadership.

A hung parliament in Italy eliminates the possibility of beneficial economic reforms, says @RobCarnell1https://t.co/qzwQWlPClR

— ING Economics (@ING_Economics) March 5, 2018

"The headlines from the Italian election suggest that the inconclusive results from the Italian election are no major surprise and will likely lead to a long period of coalition negotiations and an extension of the general status quo of a dysfunctional Italian political scene," said Saxo Bank strategist John Hardy. "Keep in mind that this is an election outcome that arrives when Italy is doing as well as it ever has since the global financial crisis - imagine if this election had arrived during a raging recession."

Provisional results of the Italian election via FT pic.twitter.com/Ji1SLBT6ir

— Marcel Dirsus (@marceldirsus) March 5, 2018

Italy's benchmark FTSE MIB index fell 1.33% by mid-morning in Milan to a six-month low while the extra yield, or spread, that investors demand to hold Italian government bonds instead of triple-A rated German bunds rose 10 basis points to 1.4%.

Widening Italian-German bond yield spreads may limit $EUR upside... but doesn't necessarily need to take it lower (seen significant short-term divergences in the past). Would need Italian election fallout to have a sustained impact on spread widening for $EUR spot to be affected pic.twitter.com/TdOI6jXVeM

— Viraj Patel (@VPatelFX) March 5, 2018

A more concerning development for broader European markets, however, may be the ongoing appetite for voters in the region to support anti-establishment and populists parties in some of its biggest member states. Last year's Germany elections, for example, saw the biggest rise of the far-right AfD party since the Second World War, while Austria's Freedom Party, which was founded by neo Nazis in the 1950s, earned 26% of the vote in that country's elections and entered the government as a junior coalition partner to the ruling conservatives.

"The fact that a majority of votes went to parties outside of the mainstream is likely to be a warning for markets that Italy's and Europe's core challenges remain unresolved," said State Street's Elliot Hentov. "All roads lead to Rome, at least when it comes to boosting the Eurozone's viability, and markets will take note that euro assets need to reflect more than just the relatively buoyant economy. On the contrary, it is increasingly clear that the Eurozone drama is far from over, even if we may be enjoying the current intermission."

Five Star could, in theory, attempt to form a government with the Northern League, a center-right party that has said it would move to take Italy out of the European Union if Brussels refuses to renegotiate immigration rules and limits on budget deficits, but such an alliance is unlikely to survive the country's complicated political protocols, suggesting President Sergio Mattarella will either need to appoint a caretaker administration of call fresh elections.