European stock markets mostly rose yesterday, 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 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 yesterday 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 $1.2929, virtually unchanged from $1.2928 late in New York on Friday.

Gold prices rose to $1,712.50 an ounce on the London Bullion Market, from $1,701.50.

But the cost to Italy of borrowing for 10 years rose sharply after Silvio Berlusconi revealed that he would challenge Monti in forthcoming elections.