Oil prices jumped nearly 2 percent, and European shares closed up for a fifth straight session as solid demand for Irish and Spanish government debt calmed investors' nerves, a day after Moody's downgraded Greece's credit rating to junk status.

Belgium also held a successful bond auction on Tuesday.

Yields paid at the auctions, however, were still sharply higher than a month ago, signaling difficult times ahead for debt-ridden European countries.

"The more the market starts to see that the credit markets are beginning to return to normalcy, the better it becomes for the euro," said Boris Schlossberg, director of currency research at GFT in New York.

The single European currency rose as high as $1.2344 on the electronic trading platform EBS, its strongest level since June 1. It remained up 0.9 percent at $1.2332 later.

Stocks rose across the board as investors felt it was safer to take on risk, despite some disappointing economic data in the United States and Germany.

The Dow Jones Industrial Average gained 133.92 points, or 1.31 percent, to 10,324.81, while the Standard & Poor's 500 Index rose 15.51 points, or 1.42 percent, to 1,105.14. The Nasdaq Composite Index was up 41.60 points, or 1.85 percent, at 2,285.56.

In Europe, the FTSEurofirst 300 index of top shares ended up 0.7 percent at 1,037.68 points, its highest close since May 13.

Despite the improved appetite for risk, gold prices remained on the rise. Spot gold prices traded 0.92 percent higher at $1,232.30 an ounce.

At 11:43 a.m. EDT (1543 GMT), US crude futures were up $1.33, or 1.77 percent, at $76.45 a barrel, having traded as high as $76.70.

In London, front-month ICE Brent July crude futures, which expire at close of trade, rose $1 to $76.20.