Stocks in the United States rose on Wednesday on hopes lawmakers will approve a rescue plan for mortgage finance companies Fannie Mae and Freddie Mac.
President George Bush has dropped a threat to veto a housing rescue bill, clearing the way for measures aimed at stabilizing the battered housing market, which has been the source of huge losses for financial companies.
Removal of the presidential veto threat spurred investors to snap up shares of Fannie and Freddie, the top two US housing finance companies, which would receive an emergency government lifeline under the bill.
Oil prices fell more than $US4 after a big increase in US inventories of gasoline.
The Dow Jones industrial average rose 29.88 points, or 0.26%, to 11,632.38.
Standard & Poor's 500 Index gained 5.11 points, or 0.4%, to 1,282.11, a three-week closing high. The Nasdaq Composite Index was up 21.92 points, or 0.95%, at 2,325.88.
US crude oil for September delivery fell $US3.94 to $US124.48 a barrel.
Trading was moderate on the New York Stock Exchange, with about 1.7 billion shares changing hands. About 2.69 billion shares were traded on the Nasdaq.
European markets up
European shares have ended more than 2% higher.
Automotive stocks also gained following strong results from Volkswagen, Peugeot and Fiat. Volkswagen was up 6.9%, Peugeot rose 9.2% and Fiat soared by 13.7% as the price of oil fell for the third consecutive session to $US126 a barrel.
Banks recorded their biggest one-day gain since mid-March with the DJStoxx European banking index rising 6.2%.
British lender HBOS soared 16.9% after market talk of bid interest from Spanish rival BBVA. Both banks declined to comment.
The FTSEurofirst 300 index of top European shares closed 2.06% higher at 1,188.99 points.
Across Europe: Germany's DAX rose 1.45% and France's CAC jumped 1.9%.
In Britain, the FTSE 100 ended up 85.8 points, 1.6%, at 5,449.9. The index is still down 15.5% to date this year.
Minutes of a policy meeting of the Bank of England on 9-10 July showed one policymaker wanted to raise interest rates and another wanted a cut.
But the remaining seven chose to keep them steady at 5% as both the inflation and economic growth outlook had deteriorated.
NZ & Australia
The NZX 50 index was up 57 points on Wednesday to 3201 on turnover of $124 million.
In the currency markets: the New Zealand dollar slipped overnight. 6.30am on Thursday, it was trading at US75.04 cents, 78.14 Australian cents, 37.55 pence, 80.96 yen and 0.4786 euro. The Trade Weighted Index was at 66.96.
The Australian share market closed up almost 2% after strong gains from the financial sector.
The S&P/ASX200 index was up 99.7 points, or 1.99%, to 5105.3, while the All Ordinaries was up 85.7 points, or 1.69%, to 5161.6.
On the Sydney Futures Exchange, the September share price index contract was 70 points higher to 5086 on a volume of 31,777 contracts.