Stocks up on news of Italy-China talks

After declining for much of Monday’s trading session due to growing concerns about Greece defaulting on its debt, U.S. stocks reversed losses in the last hour. What turned investors’ frowns upside down? News that China has been talking to Italy about buying Italian bonds and investing in Italian companies.

The Dow Jones Industrial Average rose 68.99 points, or 0.6 percent, to end at 11,061.12, after falling as low as 1,136.07, Marketwatch reports. The S&P 500 Index grew 8.04 points, or 0.7 percent, to 1,162.27, after falling as low as 1,136.07. The Nasdaq Composite Index increased by 27.10 points, or 1.1 percent, to finish at 2,495.09.

According to the Financial Times:

Lou Jiwei, chairman of China Investment Corp, one of the world’s largest sovereign wealth funds, led a delegation to Rome last week for talks with Giulio Tremonti, finance minister, and Italy’s Cassa Depositi e Prestiti, a state-controlled entity that has established an Italian Strategic Fund open to foreign investors.

Italian officials were in Beijing two weeks ago 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 fact that the Chinese are coming in again is comforting," Quincy Krosby, a market strategist for Newark, New Jersey-based Prudential Financial Inc., told Bloomberg Businessweek. "The question for the markets will be – is this enough for the depths of the endemic problems facing the European Union?”

According to the Street:

Support from the cash-rich country would take some pressure off Germany and France, which have been struggling to come up with ways to stabilize the eurozone without compromising the strength of their own economies.

The news came too late to calm jittery European markets. European stocks plunged to a two-year low on Monday, Reuters reports. The FTSEurofirst 300 index of top European shares lost 2.7 percent, ending at 890.98 points. The U.K’s FTSE 100 index lost 1.6 percent, Germany's DAX index fell by 2.3 percent and France's CAC 40 dropped 4 percent.