Results of a Spanish bank stress test on Friday that showed troubles in the sector were no worse than feared also helped boost sentiment.
Activity in US manufacturing rebounded in September after three months of weakness as new orders and employment picked up, an industry report showed on Monday. It was the first time since May that the index has been above the 50 threshold that indicates expansion in the sector.
Earlier, surveys showed factory output in Europe and Asia wilted again in September, flagging a return to recession for the euro zone and a seventh straight quarter of slowing growth in China.
"The US economy is growing at a slow pace, but it is still growing. The ISM number suggests that things are not that bad. We're not quite at the point where things are good, but this indicates strongly that things are not so bad," said Adam Sarhan, chief executive of Sarhan Capital in New York.
Wall Street stocks extended gains after the data, after closing out its best third quarter since 2010.
The Dow Jones industrial average was up 144.14 points, or 1.07 percent, at 13,581.27. The Standard & Poor's 500 Index was up 15.67 points, or 1.09 percent, at 1,456.34. The Nasdaq Composite Index was up 28.62 points, or 0.92 percent, at 3,144.84.
The MSCI global stock index rose 1.0 percent to 334.93. The FTSEurofirst-300 index of pan-European shares rose 1.51 percent to end at 1,105.68 points.
Spanish banks will need 59.3 billion euros in extra capital to ride out a serious economic downturn, an independent report showed late on Friday, matching market expectations. The country is expected to need international help to meet its debt financing needs.
However, the euro gained 0.5 percent to $1.2928, as investors preferred to sell the dollar because of the expected impact of the Federal Reserve's decision last month to ease policy in another round of bond buying dubbed QE3. The dollar was up 0.2 percent at 78.08 yen.
The benchmark 10-year US Treasury note was down 4/32, with the yield at 1.6456 percent.
Brent crude oil rose 56 cents to $112.95 after earlier falling as low as $111.47 on concerns that a shaky global economy may hurt oil demand.