Equities advanced on both sides of the pond amid an unexpected indication of confidence from Europe's largest economy, strong demand for a Spanish debt auction and a jump in the price of oil.
Data showed German investor confidence unexpectedly climbed for the first time in 10 months in December.
“Things don’t look so bad at company level,” Thilo Heidrich, an economist at Deutsche Postbank in Bonn, told Bloomberg News. “The economic situation isn’t as bad as the debt crisis would suggest. We don’t expect a clear or deep recession in Germany, and that’s reflected in this slight improvement in expectations.”
Meanwhile, Spain attracted solid demand for its debt auction, selling 4.94 billion euros of 12-month and 18-month bills, exceeding the maximum target.
In afternoon trading in New York, the Dow Jones Industrial Average rose 0.56 percent, the Standard & Poor's 500 Index gained 0.44 percent and the Nasdaq Composite Index advanced 0.19 percent. In Europe, the Stoxx 600 Index ended the session with a 0.5 percent gain.
Investors are looking for reasons to buy. Oil was one bright spot, bolstering energy shares on the FTSE 100 and on Wall Street.
Oil gained amid rumours that Iran closed a key Middle East shipping channel as OPEC ministers gather in Vienna for a meeting later today.
Crude for January delivery was last 2.1 percent up at US$99.81 a barrel on the New York Mercantile Exchange, after earlier gaining as much as 3.6 percent.
Also helping was a Citigroup forecast that Brent crude would trade in a range of US$100 to US$120 a barrel next year, up from a previous forecast of US$86 a barrel because of supply disruptions, low inventories and political tensions, according to Reuters.
“The market wants to do better. The only thing that’s holding back the market is obviously the daily news coming out of Europe,” Michael Mullaney, who helps manage US$9.5 billion at Fiduciary Trust in Boston, told Bloomberg News.
The Federal Reserve meets today to discuss the outlook for an economy that has showed signs of strength since last month's meeting. The Federal Open Market Committee is set to release a statement at about 2.15 pm Washington time.
Weighing on stocks on both sides of the pond was a Reuters report that German Chancellor Angela Merkel would reject raising the upper limit of funding for Europe’s bailout fund. Some hoped for talks about raising the ceiling of 500 billion euros at the next big summit in March 2012.
The euro weakened 0.8 percent to US$1.3085 in midday trading in New York.
Even so, it wasn't all great news from the US, either. Best Buy shares plunged more than 11 percent after the electronics retailer posted results that failed to meet expectations.
On the economic front, there were signs of weakness too. Retail sales rose 0.2 percent last month after climbing by an upwardly revised 0.6 percent in October, the Commerce Department said. The gain fell short of the 0.6 percent median forecast of economists surveyed by Bloomberg News.
"It's fairly disappointing given that all the evidence was pointing to fairly strong gains during the month," Millan Mulraine, a macro strategist at TD Securities in New York, told Reuters.