Italian stocks closed 3.23 percent higher on Thursday after a surprise ECB interest rate cut and doubts grew over whether Greece will go ahead with a controversial referendum on its latest debt bailout.
The main FTSE Mib index, which slumped more than 2.4 percent at the beginning of the session, stood at 15,766 points. Stocks gained ground after the European Central Bank said it was lowering interest rates by a quarter point to 1.25 percent.
Long-term borrowing rates were under heavy pressure however with the yield on 10-year government bonds reaching a record of 6.4 percent. A bond yield spike in August prompted the ECB to start propping up the Italian bond market.
Leading the stock market rally was tube maker Tenaris which jumped 14.63 percent, while aerospace and defence giant Finmeccanica gained 9.0 percent and auto major Fiat added 5.59 percent.