South Korea World Markets
A currency trader walks by a screen showing the Korea Composite Stock Price Index (KOSPI) at the Korea Exchange Bank headquarters in Seoul, South Kor...
A currency trader walks by a screen showing the Korea Composite Stock Price Index (KOSPI) at the Korea Exchange Bank headquarters in Seoul, South Korea, Monday, May 4, 2009. Asian stock markets rose Monday on optimism about emerging strength in the U.S. economy and easing fears about swine flu. (AP Photo/ Lee Jin-man)
Taiwan Markets
Visitors react to the huge gains in the Taiwan Stock Exchange at a brokerage in Taipei, Taiwan, Monday, May 4, 2009. The Taiwan Stock Exchange soared...
Visitors react to the huge gains in the Taiwan Stock Exchange at a brokerage in Taipei, Taiwan, Monday, May 4, 2009. The Taiwan Stock Exchange soared for a second day Monday after the island's government said last week it will allow mainland China investors buy into the island's stock market for the first time since the two sides split in civil war. The index surged 5.64 percent to 6330.40. (AP Photo/Wally Santana)
Taiwan Markets
A man walks past a monitor displaying huge gains in the Taiwan Stock Exchange in Taipei, Taiwan, Monday, May 4, 2009. The Taiwan Stock Exchange soar...
A man walks past a monitor displaying huge gains in the Taiwan Stock Exchange in Taipei, Taiwan, Monday, May 4, 2009. The Taiwan Stock Exchange soared for a second day Monday after the island's government said last week it will allow mainland China investors buy into the island's stock market for the first time since the two sides split in civil war. The index surged 5.64 percent to 6330.40. (AP Photo/Wally Santana)
Taiwan Markets
Visitors enjoy the huge gains in the Taiwan Stock Exchange at a brokerage in Taipei, Taiwan, Monday, May 4, 2009. The Taiwan Stock Exchange soared fo...
Visitors enjoy the huge gains in the Taiwan Stock Exchange at a brokerage in Taipei, Taiwan, Monday, May 4, 2009. The Taiwan Stock Exchange soared for a second day Monday after the island's government said last week it will allow mainland China investors buy into the island's stock market for the first time since the two sides split in civil war. The index surged 5.64 percent to 6330.40. (AP Photo/Wally Santana)
South Korea World Markets
South Korean currency traders work near a screen showing the Korea Composite Stock Price Index (KOSPI), right, and world stock price at the Korea Exc...
South Korean currency traders work near a screen showing the Korea Composite Stock Price Index (KOSPI), right, and world stock price at the Korea Exchange Bank headquarters in Seoul, South Korea, Monday, May 4, 2009. Asian stock markets rose Monday on optimism about emerging strength in the U.S. economy and easing fears about swine flu. (AP Photo/ Lee Jin-man)
South Korea World Markets
A currency trader work in front of screens showing the World Stock Price at the Korea Exchange Bank headquarters in Seoul, South Korea, Monday, May 4...
A currency trader work in front of screens showing the World Stock Price at the Korea Exchange Bank headquarters in Seoul, South Korea, Monday, May 4, 2009. Asian stock markets rose Monday on optimism about emerging strength in the U.S. economy and easing fears about swine flu. (AP Photo/ Lee Jin-man)
China Markets
An investor looks at the stock price monitor at a private securities company Monday May 4, 2009 in Shanghai, China. Chinese shares rose Monday, buoye...
An investor looks at the stock price monitor at a private securities company Monday May 4, 2009 in Shanghai, China. Chinese shares rose Monday, buoyed by hopes that stronger purchasing order data mean the economy may be recovering from a slowdown that began late last year. The benchmark Shanghai Composite Index gained 82.34 points, or 3.3 percent, to close at 2,559.91. (AP Photo/Eugene Hoshiko)
China Markets
An investor looks at the stock price monitor at a private securities company Monday May 4, 2009 in Shanghai, China. Chinese shares rose on Monday, bu...
An investor looks at the stock price monitor at a private securities company Monday May 4, 2009 in Shanghai, China. Chinese shares rose on Monday, buoyed by hopes that stronger purchasing order data mean the economy may be recovering from a slowdown that began late last year. The benchmark Shanghai Composite Index gained 82.34 points, or 3.3 percent, to close at 2,559.91. (AP Photo/Eugene Hoshiko)
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.