World markets began to strain yesterday after a rollercoaster week that has seen oil break $80 a barrel, Italian politics rattle the euro zone again and emerging markets battered by a pumped-up dollar and rising borrowing costs.

Traders hit Italian bonds, stocks and the euro as a pledge to ramp up spending from a coalition government taking shape in Rome caused fresh unease, while Wall Street was waiting to see the outcome of US and China trade talks.

Italy's strife sent long-term borrowing to more than seven-month highs, stocks in Milan fell one per cent taking European stocks down with them, while the euro dropped back towards this week's five-month low.

Rome's bonds have seen their biggest sell-off in over a year this week. Italy accounts for around 15 per cent of euro zone GDP and a quarter of the bloc’s public debt. For comparison, crisis poster child Greece contributed just 1.8 per cent to euro zone GDP and 3.3 percent to its pile of public debt.

One policy includes issuing more short-term debt to pay companies owed money by the state, the economics chief of the one of the coalition parties, the far-right League, said yesterday.

With the dollar's surge back on though, and oil shares gleeful about its rapid rise, European shares were heading for an eighth straight week of gains despite the Italian turbulence.

Slowing Japanese core consumer price growth that kept the Bank of Japan's elusive 2 per cent target well out of reach also kept the yen on the slide. It hit a four-month low of 111 per dollar.

It helped the six-currency dollar index rise to a new five-month high of 93.63.

The index has gained about 1 per cent this week, buoyed by the surge in US Treasury yields, with the 10-year US Treasury note yield scoring a seven-year peak of 3.128 per cent.

Euro traders, meanwhile, have nudged the shared currency back below $1.18. It has fallen nearly 1.2 per cent this week, largely pressured by the Italian uncertainty.

It is also heading for its fifth successive weekly drop versus the dollar, which would be a first for the shared currency since 2015.

In commodities, Brent crude oil futures were 47 cents higher at $79.76 a barrel after rising to $80.50 on Thursday, their highest since November 2014.

Brent has risen  3 per cent this week and is headed for a sixth week of gains.

Gold, meanwhile, has had its worst week since early December, having dropped more than 2 per cent.