Wall Street gained as reports of merger talks between Office Depot and OfficeMax indicated that there is plenty of value left even as benchmark equity indexes approach record highs.
Shares of Office Depot and OfficeMax jumped, last up 10.5 percent and 20.4 percent, respectively, on reports the two office supply retailers were in advanced talks to merge.
Shares of Staples also gained, last up 9.6 percent.
The talks come hot on the heels of other deals such as the $US23 billion agreement by Berkshire Hathaway and 3G Capital to acquire HJ Heinz announced last week.
"Equity investors have to be encouraged by M&A since, if the number crunchers are offering large premiums, that shows how much value is still in the market," Mike Gibbs, co-head of the equity advisory group at Raymond James in Memphis, Tennessee, told Reuters.
In afternoon trading in New York, the Dow Jones Industrial Average rose 0.35 percent, the Standard & Poor's 500 Index advanced 0.48 percent, while the Nasdaq Composite Index climbed 0.39 percent. The S&P 500 earlier touched 1528.17, the highest in five years. That compares with its record high 1565.15, set in 2007.
Wall Street was closed for the President's Day holiday yesterday.
The latest economic data showed a surprise decline in confidence among American homebuilders in February. The National Association of Home Builders/Wells Fargo builder-confidence index dropped to 46 this month from 47 in January, which was the highest since April 2006.
In Europe, the Stoxx 600 Index jumped 1.1 percent, bolstered by a report showing German investor confidence grew more than expected in February to the highest level since April 2010.
The ZEW Centre for European Economic Research says its index of investor and analyst expectations rose to 48.2 this month from 31.5 in January.
Key equity indexes also rallied in the UK, Germany, and France, gaining 1 percent, 1.6 percent and 1.9 percent, respectively.
EU data last week showed that Europe's largest economy contracted a larger-than-expected 0.6 percent in the fourth quarter of 2012.
"Despite the upbeat ZEW reading, we remain cautious with regard to Germany's prospects as there are many challenges to overcome in 2013," Johannes Gareis, euro-zone economist at Natixis in Frankfurt, told Bloomberg. "We still expect positive growth out of Germany, albeit at a slower pace than 2012."
There was some good news out of Athens overnight, with the central bank reporting a slight decline in the country's current account deficit.
However, French President Francois Hollande hit the nail on the head with his comment that Greece's outlook will only improve if its economy starts to expand again.