FTSE: 5,510.82 (–16.34) Mid-250: 10,302.24 (–85.56) Small Cap: 2,830.12 (–13.13)LONDON EQUITIES narrowed their earlier losses yesterday on market talk that Italy's prime minister Silvio Berlusconi was to resign amid mounting pressure on the country's finances and debt markets.

While markets remained in thrall to events in the euro zone, focus had shifted yesterday, from the travails of Greece to those of Italy. But speculation that a new government was imminent, more adept at tackling its debt crisis and implementing austerity measures, drove many euro zone equity indices higher by mid-session.

London’s FTSE 100 did not make it back into positive territory but more than halved its losses to end the session 0.3 per cent lower, led by investment companies.

Icap, an inter-dealer broker, climbed 3.5 per cent to 362.7p, while Man, a hedge fund, gained 0.9 per cent to 141.3p.

Resource stocks rose in afternoon trade to help keep a lid on losses. Randgold Resources added 2 per cent to £74.55, while Fresnillo gained 1.5 per cent to £18.66.

Utility stocks made gains, thanks to their defensive characteristic of paying regular dividends. Among them, International Power advanced 1.6 per cent to 335.4p and Scottish Southern Energy added 1.8 per cent to £13.38.

The recent trend for well-received corporate earnings news received a knock.

Weir fell to the bottom of the FTSE 100 as it stood by existing profit guidance for the full-year. The company, which makes pumps used in the gas extraction process known as fracking, said market conditions in the industry remained “strong” but it was unable to re-energise its stock after a 40 per cent rally over the past month. Its shares fell 3.7 per cent to £18.58.

Other big fallers had the familiar ring of the risk-off trading seen as investors struggle to come to terms with the twists and turns of the fraught political response to the Greek debt crisis.

Banks were weaker, as worries about the cracks in euro zone capital markets and their potential implications intensified.

Italian 10-year yields touched 6.66 per cent, their highest level since the shared currency’s adoption.

Royal Bank of Scotland lost 3.6 per cent to 22.24p, and Lloyds Banking fell 3.1 per cent to 27.7p. – (Copyright The Financial Times Limited 2011)