Stocks in the US advanced as better-than-anticipated earnings outweighed a decline in homebuilder confidence.
In late trading, the Dow Jones industrial average gained 0.68 per cent, the Standard & Poor's 500 Index rose 0.70 per cent and the Nasdaq Composite Index advanced 0.83 per cent.
Among the most active stocks on Wall Street were Microsoft, Halliburton and BP.
Halliburton posted a better-than-expected 83 per cent jump in quarterly profit on strong US onshore drilling. Boeing will unveil a significant number of new orders in the coming days and won an order for 30 777 wide-bodied aircraft from Dubai-based Emirates.
Not all companies surprised on the upside, keeping alive concern about the economic outlook. Hasbro and Delta Air Lines posted revenues that fell short of expectations.
"In the cases where all or most of the earnings were generated in improved margins and cost-cutting, those stocks are seen as low-quality," Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut, told Reuters.
US homebuilder sentiment fell more than expected in July to its lowest level in more than a year after a homebuyer tax credit expired.
The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street's 'fear gauge', declined 3.58 per cent to 25.31.
The Stoxx Europe 600 Index declined 0.8 per cent to 246.18.
Across Europe, the U.K.'s FTSE 100 fell 0.2 per cent, France's CAC 40 lost 0.4 per cent and Germany's DAX declined 0.5 per cent.
Ireland's ISEQ Index fell 1.2 per cent as Moody's Investors Service downgraded the nation's credit rating to Aa2 from Aa1.
Among the most active stocks in Europe were BP, Electrolux and Boliden.
US Treasuries fell, as equity markets rose.
The two-year note yield increased 1 basis point, or 0.01 percentage point, to 0.59 per cent at 2.45pm in New York, according to BGCantor Market Data. The 10-year note yield increased 4 basis points to 2.96 per cent.
For the first time since the government started collecting the data, central banks, mutual funds and US banks are buying more government securities at US Treasury auctions than Wall Street's bond dealers, according to Bloomberg News.
Foreign and domestic investors bidding directly at note and bond auctions bought 57 per cent of the US$1.26 trillion in US Treasuries sold by the government this year, up from 45 per cent during the same period in 2009 and as little as 32 per cent for all of 2008, according to government data compiled by Bloomberg.
The Dollar Index, which measures the greenback against a basket of six major currencies, rose 0.04 per cent to 82.52.
The euro fell as investors bet that gains supported by rising European money market rates were overdone.
"The euro is still relatively well bid and I would not be surprised to see 1.3200 next week as people continue to want to get out of these mature short positions," John McCarthy, director of foreign exchange trading at ING Capital Markets in New York, told Reuters. "It just got a little too far, too fast."
In afternoon trade in New York, the euro was slightly lower at US$1.2920, after earlier rising to a two-month high of US$1.3008 on electronic trading platform EBS.
Investors are closely watching the US dollar against the yen on the possibility of the greenback dropping to a 15-year low by breaching the November 2009 trough of 84.81 on Reuters data and 84.82 on electronic trading platform EBS.
The US dollar fell 0.9 per cent to 86.67 yen.
The Reuters/Jefferies CRB Index, which tracks 19 raw materials, fell 0.39 per cent to 261.20.
Oil jumped more than US$1 on early signs of improving oil demand.
On the New York Mercantile Exchange, US crude oil for August delivery rose US$1.20 to US$77.21 by 1350 GMT.
London Brent crude gained US$1.20 to US$76.57.
Implied volatility for US crude has fallen to about 30 per cent over the last month as prices have stabilised around $75 per barrel, which is in the middle of the price range preferred by many oil producers and consumer governments.
Gold fell 1 per cent. COMEX August gold futures have broken below a major up-trend line dated back from a February low after suffering a price breakdown on Friday, Rick Bensignor, chief market strategist at investment banking group Execution Noble, told Reuters.
Spot gold was at US$1,181.80 an ounce at 1.30pm EDT (1730 GMT), against US$1,193.10 late in New York on Friday.
US gold futures for August delivery settled down US$6.30 an ounce at US$1,181.90.
US copper rose. Copper for September delivery closed at US$2.9380 per pound on the COMEX metals division of the New York Mercantile Exchange.