Stocks advanced amid expectations a deal on Greece's second financial rescue was imminent and that China was moving to increase liquidity at its banks.
Euro zone finance ministers on Monday met to discuss the Greek bailout deal and are expected to approve the agreement to avoid a default for the country and stem the uncertainty around the common currency.
"Today we are aiming to finalise the decision on a new rescue package for Greece," German finance minister Wolfgang Schaeuble said before today's meeting in Brussels.
The bonds of most of Europe’s lower-rated nations are outperforming German bunds as investors bet the crisis will be contained, Steven Major, global head of fixed-income research at HSBC Holdings, told Bloomberg.
“Spain, Italy, Portugal and especially Ireland have done really well,” Major said.
Europe's Stoxx 600 index ended the session with an 0.8 percent climb for the day. US markets were closed for a holiday.
Less than two months into the year, the benchmark Standard & Poor's index is up more than 8 percent and has already exceeded many analysts' forecasts for the year. The index ended Friday at 1,361, its highest since May 2011. That was above a Reuters poll forecast in December that the index would end 2012 at 1,340.
A break above 1,370 would put the S&P 500 at its highest since June 2008, before the September 2008 collapse of Lehman Brothers.
"We have the US economy accelerating with the job data and housing data also beginning to look pretty good,” Peter Garnry, an equity strategist at Saxo Bank, told Bloomberg. “We think it is in most countries’ interest to preserve the European Union and the euro. We think there will be a deal.”
The euro advanced 0.7 percent to US$1.3244. While approval will be positive, traders expect any Greek deal to bring only short-term gains for the currency.
"I think we will see a rally, but not a strong rally because we've been trading this topic (Greece) for a long time," Niels Christensen, FX strategist at Nordea, told Reuters. "Even if we get a deal there are still issues about (debt) restructuring and how the portfolio of Greek bonds at the ECB will be dealt with."
Shares of TNT Express soared 60 percent after rejecting a takeover offer from United Parcel Service. PostNL, a shareholder in TNT, jumped 50 percent.
Also underpinning shares was China's decision to drop the amount of cash banks must set aside as reserves in an effort to boost lending and economic expansion. Reserve requirements will fall by 50 basis points from February 24.
Commodities including copper and gold benefitted too.
Copper for three-month delivery climbed 0.9 percent to US$8,245 a metric ton in London.
(BusinessDesk)
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