Italy showed the first signs that it was offset by the budget conflict with Brussels, which triggered a rally in Rome.
On the day when stocks emerged around the world, preliminary signs of progress in negotiations between the European Commission and populist Italian leaders have led to a 3% rise in the key barometer of the Italian stock market.
Bank stocks – considered particularly vulnerable in the case of a loss of confidence in Italian property due to prolonged confrontation – rose 5% on Monday.
Reports that Rome was willing to reduce its budget deficit from 2.4% of domestic production to 2% also led to a fall in the interest rate the Italian government pays to borrow on world financial markets.
The Italian Main Index of Stock Markets – FTSE MIB – was the best performance of the leading European stock exchanges on day-to-day gains, closing 2.8% higher. Frankfurt's Dax index rose by 1.45%, while City FTSE 100 finished day by 1.2% to 7,036.
After a sharp decline last week, Wall Street stock exchanges began trading in New York. The average Dow Jones industrial average grew by just under 1% thanks to the well-known black Friday consumer spending of US consumers.
Since it came to power in the spring, the Italian coalition government was in a collision course with the Commission on its plans to stimulate growth by driving a larger budget deficit.
The proposed move would run counter to the euro area fiscal rules and investors have become increasingly nervous over Italy's public finances over the past few weeks.
The concessions implied by the Roman government would nowhere be far enough to meet the requirements of Brussels.
The proposed budget deficit of 2% of GDP would still leave an open possibility for Rome to be fined by the Commission's excessive deficit procedure rules, but even partial exhaustion was sufficient to cause a decline in ten-year yields on Italian bonds – borrowing costs.
The spread between the interest rate paid by Italy and much cheaper interest rates for Germany has fallen to the lowest in more than a month.
Analysts said the pressure on the budget review came from last week when it came to selling bonds, which suggested that domestic investors are losing faith in domestic assets. Yet the rally was diminishing as the day broke down because the financial markets were worried that the concessions made by Italy were not enough.
Luigi Di Maio, Italian finance minister, said: "It is important that the budget contains the goals we have created, then if the negotiations mean that the deficit [target] it has to drop a bit, it's not important to us. "
Cyril Regnat, Paris investment bank strategist Natixis, said he was surprised by the timing of Greece's apparent transition to Italian Vice-President Matteo Salvini, who recently ruled out budget and market reaction.
"The market is exaggerated," he said. "Since today, we have no real backgrounds or characters [to the reports of lowering the budget deficit target]. "
Regnat said that the likely decline in Italian economic growth in 2019 would be likely to reach a target deficit of 2% or 2.2% of "very low".