NEW YORK - Stocks moved higher in the US and Europe on Monday, with both the Dow and the S&P 500 building on record gains seen ahead of the weekend on growing optimism for the American economy.
Expectations that the Federal Reserve will not be cutting rates as soon as many investors hoped failed to dent the upbeat mood ahead of a heavy week of US corporate earnings.
Investors will also see on Thursday data on fourth-quarter growth in the United States, which could offer clues on when the Fed might start ease rates.
"Optimism is back, more and more investors think the downward trend for stocks is over," said Pierre Veyret, an analyst at ActivTrades.
Technology stocks drove a US market rally on Friday that saw the Dow and S&P 500 index reach an all-time high, and this week will see results from Netflix and Tesla among the wave of heavyweights reporting.
The Dow rose above 38,000 points for the first time on Monday.
Wall Street's rally on Friday was helped by a closely watched survey from the University of Michigan showing a surge in consumer confidence and optimism about falling inflation.
"Investors appear unperturbed by the prospect of an avalanche of earnings heading their way," said Chris Beauchamp, chief market analyst at the trading platform IG.
"Stocks have once again defied the doubters by moving higher, after their brief outbreak of worry about the path of interest rates in the US and elsewhere," he said.
While the European Central Bank is unlikely to cut rates at its policy meeting on Thursday, all eyes will be on its president Christine Lagarde after she said last week that rate cuts could be coming this summer.
In the US, a string of data in recent weeks has shown inflation remains sticky and well above the bank's two percent target, while the jobs market continues to show resilience despite borrowing costs sitting at two-decade highs.
Minutes from the Fed's most recent meeting also showed decision-makers were happy to keep monetary policy tight until they are confident prices are under control.
On Friday, San Francisco Fed boss Mary Daly said it was likely too early to think of moving just yet, while Atlanta Fed chief Raphael Bostic said Thursday that he did not expect a policy tweak until the third quarter.
The chances of a reduction before the end of the first quarter fell last week to less than 50 percent, having been above 80 percent the week before, Bloomberg News reported.
Asian equities closed mixed, with Japanese stocks extending gains since the start of the year thanks to a weaker yen and rising Japanese inflation, ahead of a Bank of Japan policy decision later this week.
But Shanghai and Hong Kong saw heavy selling because of worries about ongoing weakness in China's economy and a lack of measures aimed at kickstarting growth.
Oil prices saw choppy trading Monday, moving higher as worries about potential supply disruptions in the Middle East offset a recent report by the International Energy Agency slashing its demand growth forecast.
"Markets continue to exercise caution over supply disruption in and around the Red Sea," Beauchamp said. "The prospect of further US retaliation on Houthi rebels in Yemen as well as on militants in Iraq and Syria is keeping the downside limited."
- Key figures around 1645 GMT -
New York - Dow: UP 0.3 percent at 37,971.68 points
New York - S&P 500: UP 0.2 percent at 4,851.29
London - FTSE 100: UP 0.4 percent at 7,487.71 (close)
Paris - CAC 40: UP 0.6 percent at 7,413.25 (close)
Frankfurt - DAX: UP 0.8 percent at 16,683.36 (close)
EURO STOXX 50: UP 0.7 percent at 4,480.32 (close)
Tokyo - Nikkei 225: UP 1.6 percent at 36,546.95 (close)
Hong Kong - Hang Seng Index: DOWN 2.3 percent at 14,961.18 (close)
Shanghai - Composite: DOWN 2.7 percent at 2,756.34 (close)
Euro/dollar: DOWN at $1.0889 from $1.0898 on Friday
Dollar/yen: DOWN at 147.90 yen from 148.12 yen
Pound/dollar: UP at $1.2715 from $1.2703
Euro/pound: DOWN at 85.63 pence from 85.78 pence
West Texas Intermediate: UP 2.3 percent at $75.12 per barrel
Brent North Sea Crude: UP 1.8 percent at $79.94 per barrel
burs-js/rl