NEW YORK (Reuters) - U.S. stocks climbed on Monday after mixed U.S. economic data and slightly stronger-than-expected German factory activity helped European stocks, even as weak Chinese data pushed down Asian markets and crude oil prices.
While data showed U.S. manufacturing activity slowed in October for a fourth month to a 2-1/2-year low, a rise in new orders offered hope. Also, construction spending rose in September to the highest in 7-1/2 years.
U.S. stocks were led by energy and healthcare sectors as investors bought up more risky investments and some short sellers were forced to cover bets, said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.
"The upward trend that was put in place last week has continued to gain steam," said James. "I don't necessarily think there's a specific catalyst for it today. Risk appetite has clearly increased."
But he noted that the direction could easily change as more U.S. companies are due to report earnings and investors await a key jobs report this week.
The Dow Jones industrial average .DJI rose 165.22 points, or 0.94 percent, to 17,828.76, the S&P 500 .SPX gained 24.69 points, or 1.19 percent, to 2,104.05 and the Nasdaq Composite .IXIC added 73.40 points, or 1.45 percent, to 5,127.15.
Activity in Germany's powerful manufacturing sector dipped last month from September but beat economists' early estimates, helping European stocks. That helped the pan-European FTSEurofirst 300 .FTEU3 stocks index close up 0.3 percent, with Germany's Dax .GDAXI ending up 0.9 percent.
China's factory activity fell for an eighth month in October, albeit at a slower pace, pointing to continued sluggishness in the world's second-largest economy.
Oil prices slid on the prospect of weak Chinese demand and record-high Russian production. [O/R] U.S. crude CLc1 settled down 1 percent at $46.14 a barrel while Brent crude LCOc1 settled down 1.6 percent at $48.79.
Worries over slowing growth in China had rattled financial markets in recent months despite steps by the Chinese authorities to stimulate the economy.
MSCI's main Asia-Pacific index .MIAPJ0000PUS, which tracks shares in key markets in the region, touched its lowest in two and a half weeks after the China data.
Bond yields rose on the prospect of higher U.S. interest rates, after the Federal Reserve left the door open last week to a first increase since 2006 in December.
Benchmark 10-year Treasury US10YT=RR yields hit their highest in over five weeks, while shorter-dated yields hit their highest in over six weeks on continued expectations of a possible Fed rate hike.
“People have come to the realization that the Fed is kind of hell-bent on getting to a liftoff,” said Robbert van Batenburg, director of flow strategy at Societe Generale in New York. A hike is expected to hurt Treasuries prices, which move inversely to yields.
Gold XAU= hit its lowest since early October on bets of a Fed rate rise.
The dollar gained back some ground against the euro, which rose earlier after comments from two members of the European Central Bank's governing council lowered expectations for a boost in its stimulus program.
The dollar was down 0.02 percent against a basket of major currencies .DXY while the euro EUR= was up 0.05 percent against the dollar.
Additional reporting by Sam Forgione, Lewis Krauskopf and Dion Rabouin in New York; Editing by Bernadette Baum and James Dalgleish