Dow Jones' rise held back by Italy worries

The Dow Jones Industrial Average has risen by 0.3%, although it was held back by the worries over Italy.

Fears are mounting over Italy because its borrowing costs are seen as unsustainable and are pushing closer to the 7% level that forced Portugal, Ireland and Greece to ask for bail-outs.

The UK’s blue chip shares index failed to make significant gains today amid growing fears the Italian economy could sink the euro.

The FTSE 100 Index rose 10 points to 5537 as the yield on Italian 10-year bonds rose from 6.37% to a euro-era high of 6.64% – a sign investors are losing confidence in the country’s creaking finances.

It had been down nearly 100 points in early trading but followed US markets higher in the afternoon.

It is widely accepted that as the third biggest economy in the eurozone, Italy is too big to be bailed out and it could potentially cause the euro to collapse.

Speculation that Prime Minister Silvio Berlusconi will hand in his resignation later this week, paving the way for an austerity programme, helped offset the negative sentiment.

The developments in Italy, which debts worth 120% of national income, pulled focus away from Greece, where Prime Minister George Papandreou has resigned.

The latest eurozone turmoil took its toll on riskier stocks from the banking and mining sectors, with Lloyds Banking Group down 0.4p to 28.2p, Royal Bank of Scotland off 0.6p at 22.4p and Essar Energy 5.8p lower at 306.2p.

Weir Group, which makes pumps and valves used in the oil and gas industry, was the biggest faller in the top flight, dropping 4% or 74.5p to 1856.5p, despite forecasting full-year profits in line with market expectations.

Chip designer Arm Holdings, which is dependent on a strong global economy to boost demand for the products it supplies, fell 21.25p to 623.8p.

On a brighter note, shares in Hovis and Mr Kipling maker Premier Foods enjoyed a much-needed rally after the FTSE 250 Index stock said its lenders had agreed to defer an upcoming test of its loans.

Premier rallied 14% or 0.5p to 3.8p.

Another troubled stock, Dixons Retail, was 0.2p higher at 11p after rival Carphone Warehouse announced it would pull its Best Buy stores venture in the UK, resulting in the closure of 11 sites.

Carphone’s shares were still 1% or 3.4p higher at 348.4p after it offset the closure news by saying it will return more than £813m to shareholders following the sale of its stake in the Best Buy mobile phone joint venture in the US.

Meanwhile, Rentokil Initial shares were 4% lower after the pest control and washrooms firm revealed more losses from its City Link parcels division.

The business has lost nearly £25m so far this year and while Rentokil insisted the current quarter will be better analysts remained unimpressed by the pledge. Shares were 2.9p lower at 66p.