US Treasuries prices fell as the data — including a pickup in US manufacturing growth last month — suggested the economic recovery continues to gain momentum, encouraging investors to take on more risk.

The Institute for Supply Management said US manufacturing grew for a 17th straight month following news of faster growth in European manufacturing as well.

In another recent positive report, China's factory inflation slowed in December, removing some pressure from the Chinese central bank to slow down the economy.

The three main US stock indexes jumped more than 1 percent on Monday following the data.

"There is a lot of money in cash, a lot of money in bonds that would like out of bonds. It's only natural, with the economic improvement, it's finding its way to equities," said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.

The big test for the US economy lies on Friday when the government will publish its widely watched nonfarm payrolls report.

The Dow Jones Industrial Average jumped 124.19 points, or 1.07 percent, to 11,701.70, while the Standard & Poor's 500 Index rose 16.98 points, or 1.35 percent, to 1,274.62. The Nasdaq Composite Index gained 49.31 points, or 1.86 percent, to 2,702.18.

In Europe, the the FTSEurofirst 300 index of top stocks unofficially closed 0.9 percent higher at 1,131.59 on a broad rally, led by construction and industrial shares. Trading was thin, with markets closed in Britain and parts of Asia.

The MSCI All-Country World Index rose 0.9 percent, after finishing 2010 with gains of 10 percent, back to its strongest level since September 2008.

Emerging market stocks jumped 1.3 percent, according to another MSCI index.

Oil extended its rally on optimism the global economic recovery was gaining momentum. US crude futures rose 0.8 percent to $92.11 a barrel.

Worries about the euro-zone debt crisis weighed on the euro.

The euro started the first trading day of 2011 lower and analysts said it is likely to extend its downtrend as investors avoid the single currency due to nagging concerns about the euro-zone debt crisis.

"The euro is trading with a heavier tone. I think traders are trying to cut back their exposure on the euro as volumes normalize and given continued problems in the euro zone," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

The euro was down 0.12 percent at $1.3361 from a previous session close of $1.3377, after hitting a session low around $1.3251.

The dollar rose 0.15 percent against a basket of major currencies, according to the US Dollar Index. Against the Japanese yen, the dollar was up 0.63 percent at 81.66.

Also supporting dollar gains was a rise in US Treasury yields resulting from investors' renewed appetite for risk.

The benchmark 10-year US Treasury note was down 22/32 in price, sending its yield up to 3.3712 percent.

Gold prices held steady.