European stock markets mostly rose on Monday, though shares in Milan plunged after Italian Prime Minister Mario Monti announced his intention to resign in the latest twist to the eurozone debt crisis.
Milan's FTSE Mib benchmark index of top companies slumped 2.22 per cent to 15,354 points at the close while Italian government borrowing costs spiked on the back of the political uncertainty.
Madrid's IBEX 35 index in debt-hit Spain plummeted along with Milan in early trade, but nearly clawed back to positive territory, ending the day down 0.56 per cent to 7,805 points.
Trading elsewhere edged upwards at the close with London's FTSE 100 index of leading companies 0.12 per cent higher at 5,921.63 points, Frankfurt's DAX 30 gaining 0.17 per cent to 7,530.92 points, and the Paris CAC 40 finishing up 0.18 per cent to 3,612.10 points.
"European financial markets eked out small gains toward the end of the session, with investors attempting to brush aside the political uncertainty in Italy and instead a demonstrating a degree of optimism that US lawmakers will be able to make some meaningful headway on budget talks," said Ishaq Siddiqi, market strategist at ETX Capital.
Alexandre Baradez of Saxo Banque in Paris said: "The stock markets were also surprised (by events in Italy), but in the end investors do not think they will have real consequences on reform implementation in 2013."
Dealers on Wall Street proceeded cautiously in midday trade on Monday with the Dow Jones Industrial Average up 0.23 per cent, the tech-heavy Nasdaq index advancing 0.42 per cent and the broader S&P 500 edging 0.15 per cent higher.
In foreign exchange activity, the European single currency held steady at $US1.2929, virtually unchanged from $US1.2928 late in New York on Friday. Gold prices rose to $US1,712.50 an ounce on the London Bullion Market, from $US1,701.50.
But the cost to Italy of borrowing for 10 years rose sharply after Silvio Berlusconi revealed that he would challenge Monti in forthcoming elections.
In reaction to the turmoil, the 10-year yield on the market for existing Italian government bonds jumped to 4.817 per cent, from 4.525 per cent late on Friday.
"Whether it's Monti's early departure or the fact that Berlusconi is going to run for office again that's proving the most unsettling for markets is clearly open for debate," said Mike McCudden, head of derivatives at brokerage Interactive Investor.
"However, many consider Italy as being on the cusp of plunging into a financial markets abyss.
Monti, the caretaker prime minister since Berlusconi left office last year under a cloud of controversy, is credited with enacting deep economic reforms which had sharply reduced Italian bond yields.
Natixis strategist Cyril Regnat said the sharp rise in Italian yields now "seems a bit excessive" however, and added that the real indicator of investor sentiment would come on Wednesday when the Italian treasury auctions medium-term debt.
Earlier in the day, Asian equities mostly rose as dealers cheered an improvement in the US unemployment rate and another batch of manufacturing figures which indicated that China's economy is emerging from its slumber.