Slightly better economic news from China and Europe countered concerns over the euro zone debt crisis on Tuesday, lifting European shares and the single currency, but Greek default fears and a looming debt sale by Spain held gains in check.
U.S. stock index futures also pointed to a higher open on Wall Street after the holiday weekend with a number of top companies, including Citigroup Inc., due to report quarterly results.
German investor sentiment posted its biggest ever monthly improvement in January, helped by recent upbeat data and hopes the European Central Bank's efforts to ease the region's debt problems.
The German data followed earlier numbers from China showing a much-feared slowdown in the world's second-largest economy was not as great as some had expected and still kept alive hopes for more policy easing measures from the government.
The strong reading on German business sentiment, while encouraging, still indicated tough times ahead for the euro zone's largest economy, economists said. While the ZEW sentiment index improved markedly, it remained in negative territory.
The brightening economic news gave investors encouragement to move into riskier assets, lifting the euro and causing the U.S. dollar to drop against a range of currencies, including the Australian and New Zealand dollars.
The euro was near its session high of $1.28 U.S., a 1% gain on the day, and away from a 17-month low of $1.2624 U.S. hit last week.
Sentiment also got a lift from data showing euro zone consumer prices fell more than expected in December, the start of a retreat from a November peak that could give the European Central Bank more room to cut interest rates as the economy heads for recession.
European shares hit five-month highs after all the economic data, to be up 0.9% at 1,032.45 points.
But behind the brighter economic sentiment, worries remain about the prospects of a Greek debt default, which some fear could happen as soon as March when 14.5 billion euros of bond redemptions fall due.
A growing number of experts, including some from ratings agencies, have warned a default was on the cards after Greece's talks with creditors broke down on Friday.
Reflecting concerns over the outlook, commercial banks parked over half a trillion euros at the European Central Bank, the highest on record, as the mix of debt crisis worries and a recent giant injection of ECB cash left banks awash with money but too scared to lend it.
But a strong response to a Spanish Treasury bill auction on Tuesday eased some debt market concerns ahead of Madrid's auction of bonds with maturities up to 10 years on Thursday.
Despite a two-notch cut in its rating by Standard & Poor's, the Spanish auctions should benefit from support from banks flush with European Central Bank cash and the market's view that the new government is serious about addressing its economic woes.
The E.C.B. tender was a factor in a strong sale last week in which Spain perked up debt markets by selling 10 billion euros of bonds, twice the amount it targeted, at falling yields.
Commodity prices, mining stocks and commodity-related currencies all gained on hopes of greater economic activity after the Chinese GDP figures.
