Stocks on Wall Street have joined a worldwide rally, buoyed by a spurt in Chinese manufacturing and moves to ease the impact of the Dubai debt crisis on the world financial system.

The Dow Jones Industrial Average rose to a 14-month high after China said its manufacturing grew at the fastest pace in five years and Dubai World said it’s in talks to restructure $US26 billion in debt – less than half its total borrowings.

Among the Dow, Caterpillar added 1.6% and Alcoa climbed 1.2% on positive signs of increased production in China.

The Dow closed 126.74 points, or 1.2%, up at 10,471.58, a level last hit on October 2, 2008. Of the measure's 30 components, 28 advanced.

Exxon Mobil helped send S&P 500 Index energy stocks to a 1.1% gain as oil rose for a second day. American International Group surged 11% after reducing debt owed to the US government by $25 billion.

The S&P 500 added 1.2% to 1108.86 while the Nasdaq Composite was up 1.5% to 2175.81.

Canadian stocks rose to a 14-month high, led by raw material and energy producers, as a drop in the value of the US dollar pushed gold to a record and copper, silver and oil prices climbed.

Barrick Gold led gains among raw-material producers, rising 4.8%. Suncor Energy climbed 2.7%.

The $&P/TSX Composite Index surged 260.12 points, or 2.3%, to 11,707.32.

European stocks were sharply higher as risk appetite recovered following strong performances in Asia and lower concerns about Dubai World's debt difficulties.

Alstom and Schneider Electric were among the biggest gainers, up 5.8% and 3.4% respectively on news Areva has picked them to acquire its power transmission and distribution businesses.

Banks also advanced, with BNP Paribas adding 0.4% after it raised the level of synergies it expects from its acquisition of Belgian bank Fortis.

The Dow Jones Stoxx 600 Index added 2.6% to 245.28, as all 19 industry groups advanced.

The FTSE 100 index was up 92.37 points, or 1.8%, at 5283.05 while Germany's DAX rose 111.01 points, or 2%, at 5736.96. The CAC-40 in France was 68.44 points, or 1.9%, higher at 3748.59.