Investors jumped into equities on Monday, the first full day of 2009 trading for many, as low prices and hopes for a global economic recovery later this year prompted a shift into riskier assets.
Fears of spreading trouble in the Middle East, meanwhile, kept oil prices firm. The dollar climbed, sending the euro to a three-week low.
Equity investors were boosted by U.S. President-elect Barack Obama's plans for as much as $310 billion in tax cuts, the latest in a series of measures aimed at tackling a financial crisis that has plunged major economies into recession.
World stocks as measured by MSCI were up around 0.2 percent on the day with riskier emerging market shares gaining 2 percent.
The pan-European FTSEurofirst 300 gained 1.3 percent and Japan's Nikkei average closed up 2.07 percent.
"Expectations that Obama will come in with a big stimulus package are helping," said Bernard McAlinden, investment strategist at NCB Stockbrokers. "The market is looking for any signs that some of the forward-looking indicators … have bottomed."
Equities ended 2008 with something of a rally, with the MSCI all-country world index gaining 3.6 percent for the month. So far this year, the index is up another 2.9 percent.
It all pales, however, in comparison with a more than 43 percent loss for the whole of last year.
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Oil prices climbed above $48 a barrel before falling back to around $46.50.
There were reports that an Iranian military commander had called on Islamic countries to cut oil exports to Israel's supporters in response to the Jewish state's offensive in Gaza,
Oil has gained in the region of 24 percent since Israel began its bombardment of Gaza in retaliation from rocket attacks.
Russia's move to cut natural gas supplies to Ukraine also put upward pressure on prices.
On foreign exchange markets, the euro fell to a three week low versus the dollar below $1.37, with the U.S. currency also striking a 3-week peak against the yen.
"Stocks are firming and there seems to be a slight bias towards risk taking," said Steve Barrow, senior currency strategist at Standard Bank in London. "To some extent the risk play is affecting euro/dollar."
The euro was down 1.4 percent on the day, having hit a low of $1.3676, while the dollar rose 0.7 percent to 92.86 yen.
Demand for euro zone government bonds fell.
The interest rate-sensitive two-year Schatz yield was up 2.6 basis points at 1.763 percent and the 10-year Bund yield gained 7 basis points to 3.023 percent. Bond prices move inversely with yields.
