LON­DON–Ital­ian fi­nan­cial as­sets were the big win­ners Mon­day at the start of an ac­tion-packed week in glob­al mar­kets, as in­vestors cheered the news that a new gov­ern­ment has been formed af­ter two months of po­lit­i­cal dead­lock.

The for­ma­tion of the coun­try's new coali­tion gov­ern­ment, led by Pre­mier En­ri­co Let­ta from the cen­ter-left De­mo­c­ra­t­ic Par­ty, brings to an end a pe­ri­od of un­cer­tain­ty in the coun­try fol­low­ing in­con­clu­sive elec­tions in Feb­ru­ary. The gov­ern­ment, which is made up of forces from the cen­ter-left and the cen­ter-right, faces its first test lat­er dur­ing a con­fi­dence vote in Par­lia­ment.

As the third-biggest econ­o­my among the 17 Eu­ro­pean Union coun­tries that use the eu­ro, Italy is huge­ly im­por­tant to the fu­ture of the sin­gle cur­ren­cy. It has the sec­ond-high­est debt bur­den in the eu­ro­zone af­ter Greece, so it re­mains un­der mar­ket pres­sure to keep a lid on its bor­row­ings. Over the past cou­ple of years, Italy has done a lot to bring its debt down but at a high cost, with the econ­o­my back in re­ces­sion and un­em­ploy­ment on the rise.

"Giv­en the frac­tious na­ture of Ital­ian pol­i­tics, the new gov­ern­ment head­ed by En­ri­co Let­ta is in­deed progress," said Michael Hew­son, se­nior mar­kets an­a­lyst at CMC Mar­kets."How­ev­er it was done with­out any of the pro­tag­o­nists who had led Italy's main po­lit­i­cal par­ties in the orig­i­nal elec­tion cam­paign, which could bring in­to ques­tion the de­mo­c­ra­t­ic le­git­i­ma­cy of the en­tire process with tech­nocrats in a num­ber of key po­si­tions," he added.

De­spite those wor­ries, Italy's FTSE MIB in­dex out­per­formed all its peers. It rose 2.2 per cent to close at 16,929.68. In an­oth­er sign of op­ti­mism, the yield on the coun­try's bench­mark 10-year bond dropped around 0.15 per­cent­age points to 3.87 per cent. That's the first time it has dropped be­low 4 per cent since No­vem­ber, 2010.

The eu­ro was al­so sol­id, trad­ing 0.4 per cent high­er at $1.3086.Else­where in Eu­rope, the FTSE 100 in­dex of lead­ing British shares rose 0.5 per cent to close at 6,458.02 while Ger­many's DAX rose 0.8 per cent to 7,873.50.The CAC-40 in France end­ed 1.5 per­cent high­er at 3,868.69. (AP)