World Market Overview

U.S. stocks kicked off the new year with a rally to fresh over-two-year highs Monday, boosted by data showing improving manufacturing conditions and rising construction spending.

Bank of America led the measure's climb, jumping 5.5%.

The banking company said it expects to take a provision of about $3 billion in the fourth quarter to buy back bad loans from Freddie Mac and Fannie Mae that were issued by its troubled Countrywide Financial unit.

Investors were relieved to see the size of the hit from the bad loan repurchases quantified.

Alcoa and Boeing also rose, boosted by upgrades from analysts.

Alcoa climbed 4.2% after Deutsche Bank raised its investment rating on the aluminum company's stock to buy from hold, citing growing optimism on the likelihood for higher aluminum prices and a belief that Alcoa has turned the corner from an operational point of view.

Boeing climbed 1.6% after J.P. Morgan upgraded its investment rating on the stock to overweight from neutral, citing an improving outlook for core commercial aircraft.

However, Intel fell 0.8%.

Piper Jaffray cut its investment rating on the stock to neutral from overweight, saying Intel is missing the wave of ultramobile devices, and it expects PC unit growth to decline.

European Markets

European stock markets closed sharply higher on Monday, helped by strong US economic data on the first trading day of the year.

Dealers said the tone was positive, with investors who anticipate a stronger US recovery able to find solid support in news that US manufacturing grew in December for a 17th month, capping a strong year for a key sector.

The gains came despite London, Europe's biggest market, being closed for a public holiday, leaving Paris to lead the way with a jump of 2.52 percent to 3,900.86 points on the CAC 40 index.

In Frankfurt, the DAX gained 1.09 percent to 6,989.74 points.

Elsewhere, Amsterdam rose 1.49 percent, Brussels advanced 2.06 percent, Madrid added 0.30 percent, Milan put on 1.30 percent and Swiss stocks rose 0.90 percent.

Asian Markets

Asian stock markets kicked off the new year with solid gains Monday, with South Korea's main index rising to an all-time high, led by technology and auto companies amid optimism on the global demand outlook.

South Korea's Kospi Composite rose 0.9% to 2070.08, Hong Kong's Hang Seng Index added 1.7%, Singapore's Straits Times Index gained 1.4% and India's Sensex tacked on 0.3%.

Markets in Australia, Japan, New Zealand, Thailand, China and Vietnam were shut.

Though the mood was positive, one analyst cautioned it was too early to read into the market's action owing to the closure of several regional stock markets and the large number of investors still on holiday.

In South Korea, one analyst said investors' sentiment remained bullish on further gains, even as the index was nearing a level that warranted caution.

Korean technology companies advanced as investors remained optimistic about the slow but steady economic recovery of the U.S., which is a key market for local exporters.

Samsung Electronics gained 1.0%, Hynix Semiconductor rose 5.4% and LG Electronics added 1.7%.

Hopes for improvement in the global economy also lifted automobile firms with Hyundai Motor up 2.0% and Kia Motors up 3.8%.

Hyundai Motor Group Chairman Chung Mong-koo said the group is aiming to sell 6.33 million units in the global market in 2011, up 10% from a year earlier.

In Hong Kong, gains were led by conglomerate Hutchison Whampoa, though all blue chips rose amid optimism about China's economic outlook.

Hutchison Whampoa, Hong Kong's best-performing blue chip last year with a 50% rise, was the day's biggest blue-chip gainer, jumping 5.3% after saying it will raise its port holdings in Hong Kong and Yantian, Guangdong province, by buying stakes from China Resources Holdings as part of a HK$5.7 billion deal.

Contract handset maker Foxconn International, the worst performing blue chip in 2010 with a 40% fall, surged 5.0% on bargain hunting.

PetroChina tacked on 2% after agreeing to sell a wholly owned unit to its parent for CNY2.11 billion ($320.2 million).

In Taiwan, financial stocks were standouts, helped by an unsourced report in Apple Daily that the island's financial regulator has agreed in principle to let domestic funds invest up to 30% of their assets in China's stock markets, from 10% currently.

Taiwan Life and Cosmos Bank both ended 6.9% higher, while Taiwan's China Life gained 2.6%.

Base Metals

Oil prices started the new year by rising sharply on Monday, as supportive U.S. economic data fed expectations of stronger energy demand and extended forecasts for more cold temperatures lifted heating oil futures, according to Reuters.

Earlier on Monday, news that China's factory inflation cooled in December helped ease concerns that China would resort to more monetary tightening to curb economic growth and in turn weaken growth in energy demand.

U.S. crude oil futures were building on their end of year rally that left prices above $91 on Friday and up 15 percent on the year.

They posted the highest year end level since 2007 when the market was ascending to the all time high of $147 a barrel hit in July 2008.

U.S. crude oil for February delivery rose 81 cents, or 0.89%, to $92.19 a barrel.

Gold futures on the COMEX Division of the New York Mercantile Exchange returned to positive territory and settled at a record high closing on Monday, as bargain hunting lent support after the precious metal lost some ground in response to the strength in the U.S. dollar and equity market.

The most active gold contract for February delivery added $1.50 dollars, or 0.1%, to $1,422.90 per ounce, the highest gold settlement price ever.

Comex copper futures set their third consecutive record settlement Monday, locking in a gain on the first day of 2011 on upbeat U.S. economic data.

The thinly traded January delivery contract settled up 0.3%, or 1.2 cents, at $4.4515 per pound on the Comex delivery of the New York Mercantile Exchange.

The most actively traded contact, for March delivery, settled up 0.2%, or 1.05 cents, at $4.4575 a pound, the third consecutive record settlement for the contract.

The contract also set a fresh intraday record at $4.4980 Monday.

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