Silvio Berlusconi has ruled out an alliance with former Italian prime minister Mario Monti and said the election results reflected popular discontent with austerity measures.
Speaking in a TV interview after the Italian elections created a political stalemate, Berlusconi said it was time to reflect on the results.
But he also added that a return to polls wouldn't be "useful".
Italian banking stocks were halted limit-down at the open. Once they opened, Intesa Sanpaolo, the country's second-largest bank, dropped 10 percent and Mediobanca shares dropped 8 percent. By lunchtime, the Italian market regulator had banned short-selling in Intesa shares. It also banned short-selling in mid-cap bank Carige, whose shares fell 10.5 percent.
(Read More: Italy 'Hung, Drawn and Quartered' by Deadlock)
Italy's 10-year bond yields rose to 4.87 percent on Tuesday from 4.448 percent at the close on Monday. The spread between safe-haven German bunds and Italian bonds jumped 57 basis points to 336 basis points.
Italy also went ahead with a 6-month T-bill auction, selling 8.75 billion euros, but yields jumped to the highest level since October 2012.
The average yield at the auction was 1.237 percent, up from 0.731 percent at the end of January.
(Find Out More: Italian Bond Yields)