While you were sleeping: Buffett, China lift stocks

Wall Street gained, bolstered by Warren Buffett's agreement to buy Precision Castparts as well as a rally in Chinese stocks on bets China's government will add stimulus to boost the economy.

Shares of Precision Castparts rallied, last up 19.2%, after Warren Buffett's Berkshire Hathaway agreed to buy the maker of equipment for the aerospace, energy and power industries for $US37.2 billion, including debt.

"I've admired PCC's operation for a long time. For good reasons, it is the supplier of choice for the world's aerospace industry, one of the largest sources of American exports," Mr Buffett, Berkshire's chairman and CEO, said in a statement.

In late trading in New York, the Dow Jones Industrial Average climbed 1.41%, the Standard & Poor's 500 Index advanced 1.29%, while the Nasdaq Composite Index added 1.28%.

The outlook for mergers and acquisitions remains favourable, even with a likely interest rate increase by the US Federal Reserve, which has repeatedly flagged it plans a hike this year.

"M&A will continue to be robust because funding is still cheap and excess cash needs to be invested," Aaron Clark, a portfolio manager at GW&K Investment Management, told Reuters. "We are also seeing a lot of activist investor activity."

Indeed, Atlanta Fed President Dennis Lockhart said a rate hike is "close."

"Fed chairwoman Janet Yellen has stated she expects conditions to jell, justifying a start to policy normalisation sometime later this year," Mr Lockhart said in a speech in Atlanta. "I agree. I think the point of liftoff is close."

Gains in shares of Apple and those of Caterpillar, last up 3.7% and 3.5% respectively, propelled the Dow higher.

Also adding to sentiment was a rally in Chinese stocks after separate reports over the weekend showing larger-than-expected declines in the country's producer price index as well as exports fuelled expectations for fresh government stimulus to stoke the pace of growth.

"China started it off with a 5% rally, there was another test of the S&P 200-day moving average, plus merger activity with Berkshire and PCP kind of gave the market an excuse to rally this morning," Mark Kepner, an equity trader at Themis Trading in Chatham, New Jersey, told Bloomberg. "Since we have sold off a bit lately, it just sets up for a morning rally."

In Europe, the Stoxx 600 Index finished the day with a 0.7% advance from the previous close. The UK's FTSE 100 Index rose 0.3%, France's CAC 40 Index gained 0.8%, while Germany's DAX Index climbed 1%.

Greece's ASE Index increased 2.1% amid policy makers' optimism that negotiations on a third bailout agreement might conclude by Tuesday.

(BusinessDesk)