Stocks pushed higher Friday as better than expected U.S. retail sales data and positive corporate news overshadowed fears from Europe's debt crisis.
U.S. retail sales for September rose 1.1 percent, ahead of 0.7 percent market expectations. That indicated to some that the world's largest economy might not be in as much trouble as feared earlier.
"Today's data suggests a better outcome for third quarter consumption," said Robert Lynch at HSBC Global Research. "That is an encouraging development in an economy that has generally been on the receiving end of bad news."
The markets took the news as positive despite some economists fears that a weak labor market and the need for consumers to save and pay down debt will mean the retail bounce is only temporary.
A batch of corporate news from companies like Google and Unilever had earlier buoyed sentiment.
In Europe, the FTSE 100 index of leading British shares closed up 1.2 percent at 5,466.36, while Germany's DAX 30 rose 0.9 percent to 5,967.20. France's CAC 40 ended 1 percent higher at 3,217.89.
In the U.S., the Dow Jones industrial average rose 0.6 percent to 11,551 and the broader Standard & Poor's 500 share index was up 0.9 percent at 1,214.
Evidence of the more risk-on backdrop was evident in oil prices and the performance of the euro currency too _ New York Mercantile month-ahead crude was up $2.20 to $86.43, while the euro traded 0.9 percent higher to $1.3852.
Markets appear for the moment to have priced in expectations that European leaders will sort out key aspects of a more aggressive solution to their debt crisis in time for a European summit Oct. 23 and a Group of 20 meeting in early November. That confidence kept sentiment in check despite a downgrade of Spain's debt from credit ratings agency Standard and Poor's and Fitch's warning about a number of banks around the world.
European officials have outlined what they say will be a decisive effort to quell the debt crisis, renegotiating a new debt relief deal for Greece that could inflict higher bond writedowns on creditor banks. Ahead of that, the European Union is seeking to force banks that are deemed to be insufficiently capitalized to increase their financial cushions, a step that can lead to shareholder losses and reduced dividends. Key details _ such as the amount of new losses for Greek bondholders _ remain open.
Earlier, most Asian markets had ended lower, with Japan's Nikkei 225 index falling 0.8 percent to close at 8,747.96, while Hong Kong's Hang Seng slid 1.4 percent to 18,501.79.
The Shanghai Composite Index in mainland China slipped 0.3 percent to finish at 2,431.37 after authorities said China's inflation rate eased to 6.1 percent in September. It's still well above the official target though.
Analysts said China's September inflation data was another sign that price increases are moderating after peaking in July, but they didn't expect the government to ease back on inflation-fighting measures just yet.
"Too many policy obstacles still lie ahead" regarding the European debt crisis, strategists at Credit Agricole CIB said in a research note, adding that questions remain unanswered over the size of recapitalization needed for European banks and how much of a loss investors will have take on Greek bonds.
AP Business Writer Pamela Sampson in Bangkok contributed to this report.