The prospect of new governments in Greece and Italy helped support market sentiment, at the end of a hugely-volatile week when investors fretted over the future of the euro currency and the outlook for the global economy.
With Greece having appointed Lucas Papademos as the prime minister of a coalition government, and Italy expected to appoint a new government headed by respected economist Mario Monti, both countries have won some breathing space to get their economies into shape.
"Equity markets are seemingly looking a little more kindly on Europe as we head into the weekend break with news of Berlusconi's accelerated departure, combined with progress from Greece over the formation of a coalition government, helping cheer stocks on a global basis," said Peter Stanhope, institutional trader at IG Index.
The FTSE 100 index was 0.7 per cent higher at 5,480. In the rest of Europe, Germany's DAX was up 1.3 per cent at 5,943 while the CAC-40 in France rose 0.9 per cent to 3,092. Italy's main index in Milan was also 1.1 per cent higher.
Wall Street was heading for a perky opening, though trading volumes are expected to be light on Veteran's Day, when government effectively shuts down for the day. Dow futures were up 0.6 per cent at 11,927 while the broader Standard & Poor's 500 futures rose 0.7 per cent to 1,2475.
The calm tone was also evident in the performance of the euro, which was 0.3 per cent higher at $1.3640, as well as the performance of Italian government bonds. The spike up in Italy's key borrowing rate to well over 7 per cent on Wednesday stoked fears that the eurozone's economy was heading for a Greek-style economic crisis. Only this time, the repercussions would be far worse as Italy's debt mountain of €1.9 trillion appears too big for Europe's current bailout facility to handle.
However, expectations that Monti will lead a post-Berlusconi government has helped calm those jitters, and Italy's ten-year bond yield was now down below the 7 pe rcent threshold that eventually forced Greece, Ireland and Portugal to seek bailouts. It fell another 0.17 percentage point today at 6.62 per cent.
Italy is under intense pressure to prove it has a strategy to deal with its debts, which stand at 120 per cent of economic output — it has to rollover a little more than €300 billion of its debts next year alone. But economic growth is weak and the government failed to enact reforms to revive it over the past decade.