Asian stock markets closed in the red as no end appeared in sight to more than two months of political deadlock. The euro lost its early gains, and was down 0.1 percent at a fresh 6-1/2 month low.
Talks between President Sergio Mattarella and Carlo Cottarelli, his technocrat pick for prime minister, have dragged on, and the political turmoil has raised concerns about the stability of the eurozone.
Lega supported the M5S demands for resignation of Mattarella.
The head of state, who is pro-European, accepted everyone except for Conte's choice of finance minister, an 81-year-old former industry minister names Paolo Savona, who has previously derided the euro as a German plot to control Europe.
The League is credited with 27.5 per cent of voting intentions, up from 17.4 per cent in the inconclusive March 4 elections, according to an SWG opinion poll carried out on May 23-28.
The announcement came following a meeting between Conte and the President, Sergio Mattarella, yesterday (Sunday) evening with reports suggesting another election is the only option left.
A former judge at Italy's constitutional court, Mattarella has refused to bow to what he saw as "diktats" from the two parties that he considered contrary to the country's interests.
His coalition partner and leader of the Five Star Movement, Luigi Di Maio, echoed a similar sentiment, noting that apparently only goose-stepping European Union cheerleaders are qualified to serve as minister of economy.
"We are ready to review our position..."
"Why don't we just say that in this country it's pointless that we vote, as the ratings agencies, financial lobbies decide the governments", a livid Di Maio said in a video on Facebook. However, he needs a parliamentary majority for this, which he is unlikely to receive. Let this government begin.
However, analysts doubt the new government has much of a future. The populists cried foul and abandoned their joint bid for power.
Mr Salvini has yet to say whether he will campaign with Five Star or with a centre-right alliance including Silvio Berlusconi's Forza Italia party.
A couple of weeks ago, in "Italy's Populists Furious That Bond Spreads Are Trying To "Blackmail" Them, But The Real Victim Here Is Price Discovery," I took you through a needlessly esoteric discussion of the extent to which the European Central Bank has suppressed price discovery in Europe. "It was a futile effort", he retorted while campaigning in Pisa.
He added that he was "ready to accompany the country to new elections as soon as possible", but rejected the idea they would be held in July. A return to the polls could also benefit the M5S, which advocates a mixture of left- and right-wing policies, and would be well placed to lure yet more progressive voters away from the deeply divided Democratic Party (PD). He said that he believes Italy's debt should be reduced through targeted investment and stimulation of the economy, but not austerity or tax cuts. They are merely pursuing a more aggressive nationalist course than previous Italian governments, which were always loyal to the EU.
Italy's caretaker prime minister was assembling a cabinet lineup on Tuesday, May 29, despite nearly certain rejection by populist parties whose bid for power collapsed at the weekend.
However, Emmanuel Macron, the French president, praised his Italian counterpart for fulfilling his role as the guarantor of the country's institutions with "courage and responsibility". After Conte's withdrawal, volatility on the financial markets receded. Italy's stock market opened up 1.5 percent.
Asian equities tumbled at the close. The president argued that Italy could not be perceived as entertaining an exit from the euro.
On the debt market, Italian 10-year government bond yields - which move inversely to price - were almost 8 basis points higher at 2.53 percent, having dropped 10 bps in early trade.
By Wednesday the measure had eased slightly to 275 basis points. Swearing him in might indeed have panicked capital markets, which are already agitated by the prospect of a populist partnership running the euro-zone's third-largest economy.