LONDON, Feb 22 (Reuters) - European shares rose on Friday in a broad-based rally as investors took advantage of the previous session's steep falls to pick up equities on the cheap, though traders cited some caution given weekend elections in Italy.
The FTSEurofirst 300 provisionally closed up 1.2 percent at 1,165.43, having sunk 1.5 percent on Thursday as uncertainty over the U.S. Federal Reserve's future monetary policy was compounded by disappointing news on the euro zone economy.
Brightening the mood on Friday, data showed German business morale surged at its fastest pace in over two years in February.
"People are looking more relaxed today with the Ifo showing that at least for the German economy things are moving into the right direction," Gerhard Schwarz, strategist at Baader Bank, said.
"I think we are now in a kind of digestion phase going on for a couple of weeks, and after that I would expect a resumption of the uptrend."
Investors in Europe have been seeking protection against the risk that Italian elections next week could produce a political stalemate that will make fiscal reforms more difficult to implement.