PARIS (AP) — European shares were shaken Monday by Italian Prime Minister Mario Monti's announcement he will resign by year's end, raising worries that political turmoil could derail Europe's effort to end its financial crisis.
The major stock indexes, however, recovered to close slightly higher thanks to stronger trading in the U.S.
Widely credited with restoring confidence in Italy amid a debt crisis, Monti said over the weekend that he found it impossible to lead after former Prime Minister Silvio Berlusconi's party, Parliament's largest, dropped its support.
Analysts fear Monti's unexpected resignation could spark a new round of Italian political turmoil and slow efforts to shape up the 17-country eurozone's third largest economy.
Berlusconi resigned as premier last year amid sex scandals and legal woes, unable to convince international markets that he could balance Italy's budget and pass necessary financial reforms to save Italy from a Greek-style debt crisis. Monti, a respected economist and former European Union competition commissioner, was tapped to head a government of technocrats to guide Italy.
"This (Monti's) decision has clearly been met with anxiety in the markets, with Monti's government seen as imperative to Italy's stability," Craig Erlam, market analyst for London-based Alpari, said in a note.
Italy's main stock index, the FTSE MIB, fell 2.3 percent to 15,340. The interest rate on the Italian government's 10-year bond — an indicator of how risky investors consider a country's ability to pay down its debt — rose 0.30 precentage points to 4.52 percent.
Other European stocks also fell in early trading but regained ground after the U.S. market opened. Britain's FTSE 100 was up 0.3 percent to 5,923 while Germany's DAX rose 0.2 percent to 7,532. France's CAC-40 rose 0.1 percent to 3,610.
Stocks inched higher on Wall Street after a November sales report by McDonald's boosted confidence in the consumer spending in the world's largest economy. At 1630 GMT the Dow Jones Industrial Average was up 0.2 percent at 13,187.
Investors were also slightly more upbeat in Asia, where China reported that factory output increased 10.1 percent from a year earlier in November, a sign of recovery in the world's No. 2 economy. The inflation rate rose to 2 percent, slightly below the projected 2.1 percent, the government said Sunday.
"I think China's economy has turned the corner, so that's why the market is going up," said Francis Lun, managing director of Lyncean Holdings in Hong Kong.
Japan's Nikkei 225 index rose 0.1 percent to close at 9,533.75. Hong Kong's Hang Seng advanced 0.4 percent to 22,276.72. Australia's S&P/ASX 200 gained 0.1 percent to 4,557.90. South Korea's Kospi was nearly unchanged at 1,957.42.
The China data followed the release Friday of U.S. government figures showing that employers added 146,000 jobs in November, beating economists' estimates. The unemployment rate fell to 7.7 percent from 7.9 percent, although that was mainly because more people gave up looking for work.
In commodity markets, the benchmark oil contract for January delivery was up 50 cents to $86.43 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 33 cents to finish at $85.93 per barrel on the Nymex on Friday.
In currencies, the euro fell to $1.2914 from $1.2926 in New York on Friday. The dollar fell to 82.22 yen from 82.40 yen.
Pamela Sampson in Bangkok contributed to this article.