Italy

European markets were slightly positive in early trading as new Prime Minister Mario Monti prepares to form a new government to lead the stricken country out of its debt crisis.

Despite the Greeks managing to avoid ‘blowing up' their parliament for the time being, one wonders who will be next in the firing line. Enter Italy, stage left.

The European Union has slashed its 2012 growth forecast for the eurozone by 1.3% as the European Commissioner warns the risk of a new recession has increased.

Fears of France and Spain being the next to suffer in the eurozone debt crisis intensified as 10-year bond spreads reached euro-era highs above German yields yesterday.

So, Silvio Berlusconi has finally confirmed he is leaving. The announcement caught the headlines of the newspapers across the world. And you could almost hear the cheer across Europe.

The S&P 500 has shed more than 2% at the open alongside other US markets as investors panic over the turmoil in Italy and the growing threat of contagion spreading across Europe.

Fidelity's asset allocation director Trevor Greetham has bought Italian government debt at the margin in his multi-asset portfolios in expectation of ECB intervention, after yields spiked to record highs.

Silvio Berlusconi's pledge to resign has failed to calm investor nervousness on Italian sovereign debt, with yields on 10-year bonds rising above the crucial 7% mark this morning.

The FTSE 100 dropped sharply mid-morning as investors fretted over the future of Italy following a spike in the country's bond yields to record levels.

Global markets received a much needed shot in the arm overnight as Italian prime minister Silvio Berlusconi's resignation offer reassured investors an end to the country's problems may be in sight.