The Dow Jones Industrial Average climbed to a record on optimism the US economy remains on track for a sustained recovery, while China showed it's determined to revive growth with plans for a record level of government spending.
In afternoon trading in New York, the Dow Jones Industrial Average was last up 1.01 per cent to 14,269.04, surpassing its previous intraday high of 14,198.1 and also on track to end the day above its 14,164.53 record closing level. Both previous Dow records were set in October 2007. Earlier in the session the Dow rose as high as 14,286.37.
The Standard & Poor's 500 Index gained 1.02 per cent, while the Nasdaq Composite Index advanced 1.27 per cent.
"Stocks are close to fair value, but very cheap relative to the bond market and to cash, which is very expensive," David Kelly, managing director and chief market strategist at JP Morgan Asset Management in New York, told Reuters. "Plenty of risks remain, but they are smaller-and they feel smaller to investors."
Signs of a cautious, yet persistent economic recovery, underpinned by the Federal Reserve's pledge to remain accommodative, have bolstered faith in corporate profit growth.
A report today showed the Institute for Supply Management's services index increased to 56 in February, from 55.2 in January.
That was better than economists had expected and the best reading since February 2012.
"It has been a long, grinding recovery, but the private economy is holding its own in the face of very challenging policy and political risks," Stephen Wood, chief market strategist at Russell Investments in New York, told Reuters.
In Europe, the Stoxx 600 Index ended the session with a 1.8 per cent gain from the previous close. Optimism was widespread. National benchmark indexes closed higher in all of the 18 western European markets except Greece, according to Bloomberg News.
Stocks in Paris rose 2.1 per cent, while Frankfurt climbed 2.3 per cent.
At 47.9 in February, the Markit Eurozone PMI Composite Output Index came in above the earlier flash estimate of 47.3 but was down on January's reading of 48.6.
The divergence among euro-zone economies is increasing, with the difference between Germany and France the largest in 15 years. France, Spain and Italy all showed signs of deterioration.
"Germany is on course to see the strongest quarterly growth since the spring of 2011, but France is contracting at the fastest rate for four years," Chris Williamson, chief economist at Markit, said in a statement.
"The outlook ... seems to largely depend on whether Germany can continue to expand and offset the weakness in France, Italy and Spain, which seems a tall order, meaning hopes of a return to growth for the region by mid-2013 are now looking too optimistic."
In China, outgoing Premier Wen Jiabao set a growth target of 7.5 per cent for 2013. The government plans to increase its budget deficit by 50 per cent this year, reflecting in part the impact of lower taxes as it seeks to spur consumer spending.