US and European stocks mostly rose on Wednesday as investors took a more optimistic stance on the Italian political crisis that sent them fleeing in the prior session.
The crisis in Italy continued to hover, with anti-establishment leader Luigi Di Maio seeking to resurrect a populist coalition that collapsed at the weekend by offering the president a compromise over a controversial pick for economy minister.
Yet investors adopted a more benign view of the situation, bidding up shares that tumbled in Tuesday's session on what-ifs that included a eurozone implosion or widespread defaults.
"Yesterday was a bit overdone," said Nathan Thooft of Manulife Asset Management.
"The reality is that the Italian political dynamics aren't going to be solved any time soon," he said. "The market today is realizing we don't really know what the outcomes are going to be but we are not going to bet on the worst-case scenario."
Ian Shepherdson of Pantheon Macroeconomics struck a similar note, rejecting worries that Italy could leave the eurozone.
"In the long run, anything can happen, given the massive fundamental structural flaws in the construction of the euro, but we detect no great wave of anti-euro sentiment in Italy, and the elections likely to take place in the summer probably won't deliver a clear mandate to exit the single currency," he said in a research note.
"It's not even clear that any of the parties likely to attract significant support will campaign on a platform of euro exit."
The broad-based S&P 500 climbed 1.3%, boosted by a strong performance in banking shares and in energy companies that benefited from higher oil prices.
European stocks also had a fairly good day, with Milan itself winning 2.1%. London and Frankfurt both rose, although Paris finished slightly lower.
The euro climbed back from the 10-month lows against the dollar it had fallen to on Tuesday.
A main focus in the days ahead will be the US jobs report for May released on Friday.
Payrolls firm ADP estimated US private sector job growth at 178 000 in May, down from the 204 000 in April and a bit below analyst expectations.
A Federal Reserve's "beige book" survey of economic conditions described companies as largely optimistic, despite worries about a trade war and growing labor shortages.
Economic activity expanded moderately in late April and early May," and businesses are "generally upbeat" about growth in the near term, the 12 Federal Reserve districts reported.
* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER