World stocks rally on solid US housing news

World stocks rose sharply on Monday as further upbeat U.S. housing data reinforced market hopes that the world's largest economy may be beginning to show tentative signs of a recovery.
In Europe, Germany's DAX was up 124.65 points, or 2.6 percent, at 4,894.10, while France's CAC-40 rose 74.18 points, or 2.4 percent, to 3,234.03. Trading was somewhat subdued as investors returned from a long weekend and Britain's markets were closed for a public holiday.
On Wall Street, the Dow Jones industrial average was up 166.86 points, or 2 percent, at 8,379.27 soon after the open while the broader Standard & Poor's 500 index rose 18.35 points, or 2.1 percent, to 895.87.
The strong opening in the U.S. came after further better than expected housing data fueled hopes that the housing market _ one of the main reasons behind the global recession _ may be stabilizing.
While the Commerce Department reported that construction spending rose unexpectedly in March after five straight declines, the National Association of Realtors said pending home sales rose during the month as buyers took advantage of deeply discounted prices and low interest rates.
Mounting hopes that the global economy may start to recover later this year have been the main catalyst behind the strong stock market gains witnessed in April _ U.S. stocks enjoyed their best one-month performance in nine years in April. Stock markets usually rally around six to nine months before real evidence of an economic recovery.
Analysts at BNP Paribas said the continued recovery in stock markets has made investors "question whether this is more than just a bear market rally as initially assumed."
The latest gains came despite the threat of an outbreak of global swine flu.
"A year ago that would have been enough to see global stock markets drop by 10 percent; today investors are much more sanguine about absorbing bad news," said David Buik, markets analyst at BGC Partners.
"It is unlikely that anything could be as devastating as the credit and banking crisis of the last two years," he said.
Nevertheless, investors remained wary of calling the start to a bull market, especially as the U.S. government's stress tests into 19 leading banks _ results of which are due this week _ are expected to show that several banks need more capital.
Investors are particularly concerned about Citigroup Inc. and Bank of America Corp. The Financial Times reported Sunday that the banks are working on plans to raise more than $10 billion each as they negotiate with regulators over the findings of the stress tests.
Investors in Asia were earlier encouraged by a report forecasting that the Chinese economy will expand 7 percent in the second quarter, up from 6.1 percent in the previous quarter.
China's Shanghai Composite Index rose 3.3 percent to 2,559.91, while South Korea's Kospi index climbed 2.1 percent to 1,397.92, its highest close this year.
Elsewhere in Asia, Hong Kong led the region's advance with the benchmark Hang Seng index closing up 860.06 points, or 5.5 percent, to 16,381.05.
Singapore's Straits Times Index climbed 5.6 percent, and Taiwanese shares surged on hopes for improved business ties with China. The benchmark index surged 5.6 percent to 6,330.40, building on strong gains last week, when the island's government decided to allow mainland institutional investors to invest in the Taiwan stock market.
Australia's benchmark rose 3 percent as resources stocks gained on the back of higher commodities prices.
Japan's financial markets will be closed Monday through Wednesday for the "Golden Week" holidays.
Oil prices rose with benchmark crude for June delivery up 63 cents at $53.83 a barrel in electronic trading on the New York Mercantile Exchange.
In currencies, the dollar rose to 99.45 yen from 99.10 yen late Friday in New York. The euro rose to $1.3340 from $1.3265.
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Associated Press writer Kelly Olsen in Seoul contributed to this report.