By 1400 GMT the Dow Jones industrial average was up 25.23 points at 9,241.53, building on last week's gain of 314 points and approaching its record high of 9,380.

The technology-heavy Nasdaq average was up 24 points at 2,187 and the S&P 500 was up 4 points at 1,230.

New York's rally surprised even the traders

London shares which had failed to respond to Wall Street's festive surge last week remained down 41.6 points at 5867.2 and remained closed on Monday for the Bank Holiday.

In Frankfurt, sares closed higher in extremely low volume, led by a strong performance by the newly merged DaimlerChrysler which forecast high sales.

The Xetra DAX closed at 5,040.15, up 61.53 while the DAX closed today's floor session up 93.00 at 5,044.77.

Tokyo falls back

Asian markets overnight offered no real direction.

Tokyo slipped back on disappointment with a Standard & Poor's downgrade of seven Japanese banks.

Continued worries that higher bond yields could hurt Japanese corporate activity also plagued the market.

The Nikkei average of 225 selected issues fell 72.72 points to 13,706.73.

"Until bond prices settle down, the stock market is going to remain unstable," said Sachio Ishikawa, manager at Chuo Securities.

Hong Kong moved ahead with the New York rally.