From Morrison Securities Pty. Ltd.

U.S. STOCK MARKETS

U.S. stocks staged a modest advance Monday afternoon as investors weighed the unofficial kickoff of the U.S. earnings season, due with Alcoa's report after the closing bell, against a batch of unsettling headlines from Europe.

The Dow Jones Industrial Average added 38 points, or 0.3%, to 12398, building on its 1.2% rise in the first week of the new year. The Standard & Poor's 500-stock index edged up nearly four points, or 0.3%, to 1282, and the Nasdaq Composite gained eight points, or 0.3%, to 2683.

Alcoa was the strongest blue-chip stock, rising 2.7% as investors awaited the aluminum company's fourth-quarter results. Analysts surveyed by FactSet Research are expecting, on average, a loss of a penny a share on revenue of $5.76 billion.

The unofficial earnings-season kickoff comes as several bellwether companies have tried to ratchet down Wall Street's expectations in recent weeks.

But European markets finished lower after the leaders of Germany and France Monday turned up the pressure on Greece and its international creditors, amid building worries that the euro zone's Greek bailout was unravelling. Weak German economic data contributed to the glum mood.

Auto stocks were a bright spot, as the Detroit auto show began. Ford Motor rose 1.2%, and General Motors gained 0.2%. Ford used the occasion to say it has plans to begin selling a plug-in, hybrid gasoline-electric version of its redesigned Fusion mid-sized sedan later this year. GM showcased two youth-targeted Chevrolet concept cars it says look and feel like sports cars but cost around $20,000.

A handful of technology stocks also posted outsize gains after Reuters reported that Brocade Communications, which makes switches and software to connect corporate servers and data-storage systems, has received first-round bids from potential buyers. Brocade added 6.6%. Peer Juniper Technologies was one of the top stocks in the S&P 500, rising 7.2%.

EUROPEAN STOCK MARKETS

European stock markets ended lower Monday, with UniCredit SpA leading the banking sector south, as investors digested comments from French and German leaders.

A weaker tone on Wall Street put added pressure on the Stoxx Europe 600 index, which finished 0.5% lower at 246.42. Markets spent most of the day near the flat line as German Chancellor Angela Merkel and French President Nicolas Sarkozy met in Berlin.

After the meeting, they presented a united front on the euro, and said progress had been made on plans to forge a pact to tighten up budget rules across the region. But Merkel said Greece must complete its debt haircut soon or it won't receive its second aid package.

Over the weekend, a report in a German newspaper said Greece's second bailout will need to be bigger than the planned EUR130 billion owing to worsening budget figures. The Greece ASE Composite index fell 1.7% to 636.52, led by a 3.4% fall for National Bank of Greece SA.

Shares of UniCredit SpA dropped 11% at the start of its EUR7.5 billion rights issue. UniCredit fell 36% last week after announcing Wednesday it would issue shares at a 43% discount. Other Italian banks continued to fall, with Banca Monte dei Paschi di Siena SpA down 14% and Mediobanca Banca di Credito Finanziario SpA falling 6.9%.

Italian debt came under pressure, with the yield on the 10-year Italian government bond up 15 basis points at 7.12%.

Meanwhile, shares of Banco Santander SA gave up early gains to end down 0.1%, and Spain's IBEX 35 index fell 0.1% to 8,278.90. Santander said it reached a core capital ratio of 9% ahead of the European Banking Authority's deadline of June 30, and said it still aims to reach a core capital ratio of 10% by the end of June 2012.

The French CAC 40 index fell 0.3% to 3,127.69, with shares of Societe Generale SA down 3.6%. Peugeot SA fell 4.4% to EUR12.23 after Citigroup analysts cut their price target to EUR14 from EUR17. The German DAX 30 index fell 0.7% to 6,017.23, with shares of Commerzbank AG declining 3.8%.

But car maker BMW AG rose 2.3% after reporting its best sales result ever in 2011 Monday, with sales up 14% from the previous year. Shares of rival Daimler AG rose 0.7%. The U.K.'s FTSE 100 index fell 0.7% to 5,612.26, pressured by a 4.1% fall in shares of drug maker GlaxoSmithKline PLC following the release of results on trials for lung drug Relovair. Banks were also weak, with shares of Barclays PLC dropping 4.5% and Lloyds Banking Group PLC declining 3.4%.

ASIA-PACIFIC MARKETS
Chinese and Hong Kong stocks surged Monday as hopes that Beijing may soon relax its monetary policies to support economic growth spurred strong buying across sectors.

Some regional markets suffered modest losses, however, as doubts about the euro zone's efforts to contain the debt crisis prompted investor caution despite upbeat U.S. employment data Friday.

China's Shanghai Composite Index jumped 2.9% to 2,225.89 for its biggest percentage increase since Oct. 12, while Hong Kong's Hang Seng Index climbed 1.5% to 18,865.72.

Elsewhere, South Korea's Kospi declined 0.9% to 1,826.49 and Taiwan's Taiex gave up 0.4% to 7,093.04. Japanese markets were closed for a holiday.

The gains on Chinese and Hong Kong bourses came after Chinese Premier Wen Jiabao, over the weekend, called for efforts to boost confidence in the share market, and for rulechanges to allow private-capital investment in banks and insurers.

Shares of Yanzhou Coal Mining jumped 8.2% to lead several coal miners sharply up in Shanghai; among other notable gainers, Jiangxi Copper jumped 5.3% and Anhui Conch Cement climbed 5.6%. In Hong Kong, Yanzhou jumped 4.9%, Guangzhou R&F Properties added 4.9% and Haier Electronics Group Co. gained 6%.

COMMODITIES
Base metals closed mixed on the London Metal Exchange Monday, taking support from a firmer euro but appearing fragile as investors worry over the economic outlook.

LME three-month aluminum posted the largest gains, ending the afternoon kerb up 1.8% at $2,107 a metric ton, while three-month zinc closed up 1.4% at $1,879/ton. Three-month lead's gains were more minimal, up 0.3% at $1,965/ton, while tin finished the day unchanged at $19,800/ton.

Three-month copper was the only base metal to close the session lower, ending down 1.1% at $7,496/ton. Crude-oil futures traded lower Monday, amid caution at the start of the first full week of the year and as reaction to Iran's threats to disrupt oil shipping was seen as overdone.

In addition, Germany industrial output declined 0.6% in November, adding to fears about Europe. Also, German newspaper Die Welt reported a survey of 14 economists saw Germany already in a recession. Crude for February delivery settled 25 lower at $101.31 a barrel on the New York Mercantile Exchange.

Gold slipped as early weakness in the euro bolstered the view that Europe's debt crisis would continue to provide headwinds for the precious metal. The most-actively traded gold contract, for February delivery, fell $8.70, or 0.5%, to settle at $1,608.10 a troy ounce on the Comex division of the New York Mercantile Exchange.