By Mike Peacock and Daniel Trotta
LONDON/NEW YORK (Reuters) - Chinese and European leaders plotted their next steps on Monday to steer the world economy out of recession, while bold stimulus promises from U.S. President-elect Barack Obama and progress on a U.S. auto rescue propelled stock markets higher.
The U.S. Senate was set to reconvene as White House and congressional Democrats finalized a $15 billion proposal to bail out the ailing "Big Three" U.S. automakers.
European carmakers focused on consolidation, with Italy's Fiat saying it is too small to survive on its own and Sweden reportedly considering a rescue package for Volvo and Saab.
The U.S. talks gained urgency after Friday's U.S. employment data showed more than half a million jobs were lost in November.
The lost jobs sparked a stock market rally on expectations the U.S. president-elect would act boldly, and Obama on Saturday pledged to create more than 2.5 million new jobs by 2011 and launch the largest investment in U.S. infrastructure since the 1950s.
"Obama looks like he's going to be able to fast-track one of the largest infrastructure spending packages since the history of mankind," said Arthur Hogan, chief market analyst at Jefferies & Co in Boston.
Despite continued signs the world was in for a long and deep recession -- Dow Chemical Co. became the latest company to announce job cuts and plant closures [nN08468735] -- equity investors saw buying opportunities with the Dow industrials down about 35 percent this year.
Wall Street opened higher on Obama's stimulus plan, with the Dow and the S&P 500 up more than 3 percent. European shares were up 6.5 percent after Japan's Nikkei 225 closed 5.2 percent higher.
LITTLE ROOM ON RATES
Investors looked to governments to stimulate the world economy because central banks were running out of room to cut rates further.
China's leaders gathered to map out economic policy for next year, with the government struggling to shore up growth and jobs as export demand shrinks.
The "central economic work conference" met in a closed session likely to last three days to discuss ways to keep annual growth at 8 percent or higher, said a report on the official Xinhua news agency's website.
"There is a lot of talk about support measures from China, including buying up more bank shares, a rescue package for the stock market and other steps to boost private consumption," said Peter Lai, director with DBS Vickers.
The EU leaders meet just before a European Union summit in Brussels on December 11 and 12, which will study European Commission proposals to give the sagging economy a sharp boost with a 200 billion euro ($250 billion) spending plan.
British Prime Minister Gordon Brown, French President Nicolas Sarkozy and European Commission chief Jose Manuel Barroso consulted with business leaders in London.
Britain and France have announced ambitious stimulus plans, though Europe's biggest economy, Germany, was resisting pressure to provide billions more euros as suggested by the Commission, arguing the fiscal program it already launched was enough.
The Commission approved France's bank rescue scheme on Monday and said it expected similar deals with Germany, Austria and others in coming days.
INDIAN AND AUSTRALIAN STIMULUS
India weighed in on the stimulus front, announcing on Sunday a $4 billion spending package to revive growth and shore up confidence knocked by militants' attacks on Mumbai. That followed a full point rate cut on Saturday.
Australia began handing out more than A$8 billion ($5.3 billion) to consumers, part of a stimulus package unveiled in October.
"If the government doesn't empower consumers at a time like this, in the midst of global financial crisis, then in fact we will have even greater challenges ahead," Prime Minister Kevin Rudd said.
(Additional reporting by Reuters bureaus worldwide; Editing by Steve Orlofsky)