Wall Street rises as earnings, M&A heightens optimism

Stocks rose as solid earnings and a flurry of merger activity underpinned a steady upward trend that reinforced investor optimism for the coming year.

The Dow Jones industrial average closed up 55.71 points, or 0.49 percent, at 11,533.84. The Standard & Poor's 500 Index rose 7.55 points, or 0.61 percent, at 1,254.63. The Nasdaq Composite Index gained 18.05 points, or 0.68 percent, at 2,667.61.

European shares hit a fresh 27-month closing high, with mining shares boosted by strong metals prices while Finnish forestry group UPM-Kymmene rose after saying it was buying a debt-laden rival.

The pan-European FTSEurofirst 300 index of top shares ended up 1.1 at 1,145.60 points, the highest closing level since late September 2008, though volumes were low due to the year-end holiday season.

Japan's Nikkei average hit a seven-month closing high in holiday-thin trade, as a rebound in Chinese equities encouraged investors to buy on dips.

Investors shrugged off a slightly stronger yen against the dollar and aggressively added blue-chip exporters.

Comments from a Chinese vice premier that China supports efforts by the EU to calm global markets in the wake of Europe's debt crisis lent further support, bolstering the euro-sensitive precision machinery sector. Canon Inc rose 1.6 percent.

The benchmark Nikkei gained 1.5 percent or 154.12 points to 10,370.53, while the broader Topix rose 0.9 percent to 906.21.