World markets rose Monday on strong U.S. corporate earnings and a flurry of takeover news, coupled with hopes that European leaders are making progress on a long-awaited plan to fight the continent's 2-year-old debt crisis.
European leaders failed to make tough decisions over the weekend, but pledged to unveil concrete plans by Wednesday. They are likely to include measures to recapitalize the region's banks, which are expected to accept steep losses on Greek debt, as well as boosting the eurozone bailout fund.
"All eyes are very much on European leaders' attempts to find a workable solution to the ongoing debt crisis," said Stan Shamu of IG Markets. He said "encouraging signs of progress emerging over the weekend" helped boost early trading in stock markets.
Italian Premier Silvio Berlusconi _ who received stern words from the French and German leaders over the weekend _ has convened his Cabinet to come up with a package of plausible growth measures by Wednesday, as demanded by EU leaders. Italy is seen as the next likely victim in the debt crisis, but the third largest eurozone economy would be too expensive to bail out.
Confidence-building measures will be sorely needed as European economic indicators continue to point downward.
A key survey on Monday showed that activity in the eurozone's private sector fell more than expected in October. Momentum in both manufacturing and services continued to weaken, with the so-called purchasing managers' index falling to 47.3 and 47.2 respectively. A figure below 50 denotes contraction.
Economists said that showed overall economic contraction is possible in the eurozone in the fourth quarter, but traders largely overlooked the report to focus on the likelihood that a European crisis plan would be ready by Wednesday's summit.
Britain's FTSE 100 gained 1.08 percent to 5,548.06, and Germany's DAX rose 1.41 percent to 6055.27. France's CAC-40 gained 1.55 percent to 3,220.46.
The Dow Jones industrial average was up 0.77 percent at 11,900 in early trading, and the S&P 500 rose 1.15 percent to 1,252.49.
U.S. markets were helped by bigger profits at Caterpillar and other U.S. companies, despite the global economic worries. The maker of construction equipment said its profit rose 44 percent in the latest quarter from a year earlier.
Markets also got a lift from a flurry of corporate deals, including Oracle's purchase of the tech service company RightNow Technologies Inc., and Mattel's deal to buy Hit Entertainment, the owner of Thomas & Friends and Barney brands.
Investor sentiment remains fragile, however, according to analysts at Credit Agricole CIB.
"Markets will remain nervous ahead of Wednesday's EU summit, hoping that officials can settle their differences and emerge with a concrete solution. In this respect, the risk of disappointment is high," the analysts told clients in a research note on Monday.
Asian shares closed with solid gains earlier in the day as economic data from Japan and China showed a measure of strength.
Japan's Nikkei 225 index added 1.9 percent to close at 8,843.98 after the government said exports grew for a second straight month in September. The country's trade suffered a five-month decline in the wake of the March 11 earthquake and tsunami that devastated northeast Japan.
Mainland Chinese shares rose after HSBC said its preliminary China Manufacturing Purchasing Managers Index, which measures industrial production, rose to 51.1 in October from 49.9 in September. A result above 50 indicates expansion, but the preliminary indicator is often subject to substantial revision.
In currencies, the euro rose to $1.393 from $1.3864 Friday in New York. The dollar dropped to 76.09 yen from 76.12 yen.
Benchmark crude for December delivery was up $2.89 cents at $90.29 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.33 to settle at $87.40 in New York on Friday.
Brent crude was up $1.65 cents at $111.21 a barrel on the ICE Futures Exchange in London.
Pamela Sampson contributed from Bangkok.