Stocks received a boost from data showing that US jobless claims unexpectedly fell to the lowest level since February 2008, bolstering hopes the struggling labour market may finally show some signs of improvement.
Initial claims for unemployment benefits dropped to a seasonally adjusted 339,000 in the week ended October 6, the lowest since February 2008. Economists polled by Bloomberg News and Reuters had forecast claims rising to 370,000.
"The overall trend seems to be that the labour market is improving," Brian Kim, a currency strategist at RBS Securities in Stamford, Connecticut, told Reuters.
In afternoon trading in New York, the Dow Jones Industrial Average eked out a 0.06 per cent gain, while the Standard & Poor's 500 rose 0.33 per cent. The Nasdaq Composite Index slipped 0.06 per cent.
To be sure, a separate report showed that the US trade deficit widened by 4.1 per cent to US$44.2 billion in August.
Caution remains key. Economists were less optimistic about US growth, lowering their median growth forecasts to an annualised 1.6 per cent for the first quarter of 2013, compared to 1.7 per cent last month, according to a Reuters poll today.
Yet Europe's Stoxx 600 Index also received a lift from the US jobs data, ending the day with a 0.8 per cent advance over the previous close. National benchmark stock indexes also climbed in the UK, Germany and France, rising 0.9 per cent, 1.1 per cent and 1.4 per cent respectively.
Among gainers were shares of banks in Europe and the US including Bank of America and JPMorgan Chase after a report the European Union may push back the deadline for applying tougher Basel bank-capital rules for as long as a year, according to Bloomberg.
In Spain shares of banks dropped, however, following Standard & Poor's downgrade of the nation's credit rating to one level above junk. Still, the nation's bonds held up well as Italy drew solid demand for its auction of three-year debt.
Italy sold 3.75 billion euros of its benchmark three-year bond. Investors bid for 1.67 times the amount offered, up from 1.49 times last month.
"The auctions were pretty good, they issued at the top end of the range and that had a small positive effect," Mohit Kumar, head of European fixed-income strategy at Deutsche Bank AG in London, told Bloomberg. "The market is still waiting for the next step, which is for Spain to ask for a bailout."