By Agence France-Presse
The head of the anti-establishment Five Star Movement said he was prepared to offer a compromise candidate for the finance ministry after President Sergio Mattarella's decision to veto an avowed eurosceptic led to the collapse of the fledgling coalition government.
Later, the rightwing League's leader was said to be willing to discuss the issue.
Wednesday's news provided relief to global markets that were sent spinning by the crisis in Italy -- the eurozone's third biggest economy -- which many feared could lead to fresh elections that could essentially become a referendum on euro membership.
US and European markets rallied while the euro, which was wallowing around 10-month lows against the dollar, surged, helped by a surprise surge in German inflation.
"What a difference a day makes," said Greg McKenna, chief markets strategist at AxiTrader. "My hypothesis that the players... got the shock of their lives from the market's reaction to their posturing and the turmoil that ensued has proved correct."
"Italy may not be headed for a summer election. And that means the EU may not face a referendum on its future. Phew, storm in a teacup, nothing to see here, move along, please. At least that's the take markets appear to go with last night."
The gains continued in Asia, with Tokyo ending the morning session 0.4 percent higher, while Sydney added 0.5 percent, Singapore climbed 0.7 percent and Seoul put on 0.5 percent.
Hong Kong added 0.5 percent and Shanghai gained 0.8 percent, supported by data indicating a bigger-than-expected rise in Chinese factory activity in April. Wellington, Taipei, Manila, Kuala Lumpur and Jakarta were also comfortably higher.
Oil prices were down slightly but holding up after they also rallied Wednesday in response to a report that said OPEC would likely lift output gradually, soothing concerns about a new supply glut.
Crude markets have been hammered since OPEC kingpin Saudi Arabia and Russia last week indicated they could lift a cap on production, which has supported prices for two years, as an oversupply crisis eases.
Investors are now looking forward to the release Friday of key US jobs figures, which could provide some idea about the Federal Reserve's plans for raising interest rates.
Payrolls firm ADP estimated US private sector job growth at 178,000 in May, down from 204,000 in April and slightly below analysts' expectations.
However, while sentiment is positive, analysts warned that ongoing geopolitical issues and the unresolved China-US trade row continue to dog trading floors.
"We are going to be filled with tremendous uncertainty over the course of the summer," David Ader, chief macro strategist at Informa Financial Intelligence, told Bloomberg Television.
"If you look at things like the various economic surprise indices out there they have been slowing down, but on the other hand you still have a Fed hike coming in June. I see a lot of uncertainty, which results in a lot of volatility."
Key figures around 0300 GMT
Tokyo - Nikkei 225: UP 0.4 percent at 22,112.22 (break)
Hong Kong - Hang Seng: UP 0.5 percent at 30,213.25
Shanghai - Composite: UP 0.8 percent at 3,065.35
Euro/dollar: DOWN at $1.1658 from $1.1664 at 2100 GMT
Pound/dollar: UP at $1.3293 from $1.3281
Dollar/yen: DOWN at 108.60 yen from 108.91 yen
Oil - West Texas Intermediate: DOWN 32 cents at $67.89 per barrel
Oil - Brent Crude: DOWN 40 cents at $77.10 per barrel
Milan - FTSE MIB: UP 2.1 percent at 21,797.82 (close)
New York - Dow Jones: UP 1.3 percent at 24,667.78 (close)
London - FTSE 100: UP 0.7 percent at 7,689.57 (close)