Italian stocks jumped, and bond yields tumbled, with the FTSE MIB rising as much as 1.3%, or 22,100, as of 10:48am in Milan, extending Wednesday’s 2.1% advance as the panic over Italian politics subsides... 

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... although the victory celebrations may yet prove premature.Zooming out, clearly there is a way to go before the recent equity rout is undone, although the following best performers today are doing their best: Poste Italiane +3.8%; UniCredit +3.3%; Banco BPM +3.3%; Exor +3.2%.

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Meanwhile, after trading just shy of 3% on Tuesday, Italian 2Y Yields tumbled another 91bps from Wednesday's close to a low of 0.79% this morning, before rebounding to 1.27% most recently.

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Here too, a longer-term chart does justice to the recent moves in yields.

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There are three main reasons behind today's optimism: i) the populist parties are reported to be reviving talks for a possible government, with an official stating that 5-Star's Di Maio and League's Salvini may meet today for government talks, while ii) Corriere reports that euroskeptic economist Paolo Savona may be considered as foreign affairs rather than finance minister; iii) A snap, if questionable poll, by Euromedia and Piepoli found that between 60-72% of Italians want the country to remain part of the euro while 23-24 percent would choose to drop the common currency. "Questionable" because according to another recent poll, Italians are the one European nation that remains most skeptical that EU membership has benefited to the country or that EU membership contributed to growth in the country.

Two other secondary reasons behind today's optimism is that according to Corriere, Italy's premier designate Conte said a Euro exit was never raised in talks, while Italy's scandalous president Mattarella has told the populist parties to "call him when they are ready" ostensibly with a new government proposal, one which excludes Savona as finmin.

Yet while investors are clearly optimistic, so far Salvini has been dead silent in response to the 5-star's proposal to remove Savona's candidacy as finance minister, suggesting that it is still all up to Salvini and the League, which as a reminder is catching up fast on the 5-Star in public polling and could well be the most popular Italian party as of this moment.

Whatever the underlying truth, and it will be revealed shortly, for now bullish sentiment across Europe prevails, as can be seen by the level of the Euro, which has been hugging the 1.17 line today, after dropping as low as 1.15 just two days earlier.

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So while we wait for the latest news out of Italy, and whether or not Salvini will cave to the market's whims, pulling the candidacy of Savona, and proving Oettinger right, here is an apt recap of where we find ourselves 48 hours after the biggest rout in Italian markets since the sovereign debt crisis:

48 hours later in Italy: Di Maio sorry about the whole impeachment thing, seeks government solution with Lega. Salvini says he’ll think about it and had never shut the door, but also says he wants elections asap but not too soon because Italians’ summer holidays are sacrosanct.

48 hours later in Italy: Di Maio sorry about the whole impeachment thing, seeks government solution with Lega. Salvini says he’ll think about it and had never shut the door, but also says he wants elections asap but not too soon because Italians’ summer holidays are sacrosanct.

— Alberto Nardelli (@AlbertoNardelli) May 31, 2018