World stocks rallied Monday amid signs investors were becoming more confident that the worst of the economic slump might be over.
A rally among commodity prices also fueled the gains. But inflation worries continued to grow, prompting speculation that the Federal Reserve may have to start raising interest rates before the end of this year.
"The market is starting to think that we're not going to get the prolonged, deep recession that the subprime crisis seemed to imply," said Brian Gendreau, investment strategist with ING Investment Management-Americas in New York. "All along it has been a mixed economy with some sectors such as housing and finance in recession and others such as technology and industrials not in recession."
Economic data in recent days has signaled that the economy is likely to avoid a debilitating recession. That was reinforced on Monday when the Conference Board, a private business research group, that said the economy remained weak but there were no signs of a recession.
"The news today is actually good," Hugh Johnson, chief investment officer at Johnson Illington Advisors in Albany, said of the leading-indicators report. "It confirms what financial markets have been saying since the middle of March ... that the economy and earnings will recover in the second half."
"It's not a strong signal," Johnson added. "But it's better than nothing."
Earlier Monday, a survey of economists said that the recession will be shallow and the worst of the housing slump and the credit crunch might come to an end this year.
Of course, not everyone agrees. Billionaire investor Warren Buffett said Monday that the fallout from the credit crisis is far from over.
But Deutsche Bank's Chief Executive Josef Ackermann was more upbeat.
"I think that we are getting closer to the end of the financial crisis," Ackermann told a Swiss newspaper on Sunday. "It is not fully over yet, but the signs from the United States are encouraging."
Investors, hoping business spending will hold up, bought shares of Oracle , the world's second-largest software maker, making it mong the top advancers on the Nasdaq.
Shares of big manufacturers, including Caterpillar, also headed higher and Exxon contributed the most to the Standard & Poor's 500 Index's upturn.
Oil prices eased from a fresh high hit on Friday but the relentless rise in crude prices bolstered energy-related stocks in Asia, Europe and the United States, where Exxon Mobil , the largest publicly traded oil company, led a broad stock market index higher.
"It is a bigger picture theme today, with the resilience of equities continuing even in the face of high oil prices," said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles. "There's a realization that we haven't seen, at least to date, a significant economic impact from the high oil prices and there is a general comfort level with the economic data."
Still, with energy prices heading higher, investors looked for companies that can do well in an inflationary environment.
"Many market participants are preparing for rising inflation. They are looking for companies with strong pricing power, which can easily pass on higher prices," said Markus Steinbeis, head of European equities at Pioneer Investments in Munich. Buying into the oil and mining is "one way of protecting your portfolio from a higher inflation."
Emerging market equities hit a new high for the year, wiping out their 2008 losses in a new bout of investor confidence.
MSCI's benchmark emerging market share index rose to a new 2008 high of 1250.99, wiping out all its losses this year.
--Reuters contributed to this report.