Markets rally as Italy asks China for bailout help

Stocks in the US and Asia rallied overnight after Italy turned to China for help with its debt crisis.

According to reports, Italy has held talks with China about the super-power purchasing Italian government bonds, and investments in key companies in the region, in a move it hopes will keep a lid on spiking yields.

The Financial Times said Italian officials had revealed Lou Jiwei, chairman of China Investment Corp, one of the world's largest sovereign wealth funds, had led a delegation to Rome last week for talks with Giulio Tremonti, finance minister.

Italian officials have also travelled to Beijing in the last two weeks to meet CIC and China's State Administration of Foreign Exchange (Safe), which manages the bulk of China's $3,200bn foreign exchange reserves.

Vittorio Grilli, head of treasury, met Chinese investors in Beijing in August. Italian officials said further negotiations were expected to take place soon, the FT said.

China has been purchasing European assets throughout this year, buying both corporate and government debt, and other assets.

However, commentators have warned purchases made by China so far this year have been relatively small.

The potential new lifeline for Italy lifted markets, with the Dow closing up 69 points at 11,061, and the S&P 500 up 8 points, at 1,162.3.

Asian markets also ended the session higher, with the Nikkei ahead by nearly 1%, or 81 points, at 8,616.6, although the Hang Seng sold off sharply on the news - dropping over 4% to 19,030.5.