(Reuters) - Global stocks rallied on Tuesday on a wave of optimism over the economy after a bullish outlook from U.S. aluminum maker Alcoa and a surge in China's copper imports, and the euro rose for a second day.

A well-received Greek debt auction and news that ratings agency Fitch is unlikely to downgrade France, the euro zone's second biggest economy, in 2012 helped support the euro as investors pared short positions.

U.S. stocks hit a five-month high and a key pan-European stock index notched its highest close in a week.

Alcoa Inc (AA.N), the world's second largest aluminum maker, gave a positive outlook for global demand for the metal. In addition, China, the world's biggest consumer of copper, a key industrial metal, reported that its copper imports rose in December by 12.6 percent from November to a record high.

European shares were also boosted by comments from U.S. automakers that added to hopes for an improving recovery, while optimism grew that China could take some measures to stimulate its economy.

Still, a warning from Europe's biggest consumer electronics maker, Philips (PHG.AS), that fourth-quarter profits would be soft due to weakness in its home region highlighted the contrast between the U.S. and European markets.

The Dow Jones industrial average was up 91.16 points, or 0.74 percent, at 12,483.85. The Standard & Poor's 500 Index was up 12.68 points, or 0.99 percent, at 1,293.38. The Nasdaq Composite Index was up 28.22 points, or 1.05 percent, at 2,704.78.

MSCI's all-country world equity index added nearly 1.4 percent, helped by earlier gains in Asian markets.

The pan-European FTSEurofirst 300 stocks index closed up 1.9 percent to a preliminary 1,027.63 points.

The European STOXX Oil & Gas index hit a 10-month high, boosted by Alcoa's outlook, and extended a rally that began at the start of the year, to be up 1.5 percent on the day at 353.53 points.

A good start to the earnings season, it shows the demand outlook is not so bad and we could get more positive surprises, said Mike Lenhoff, chief strategist and head of research at Brewin Dolphin Securities.

The euro stayed above a recent 16-month low as investors pared short positions, but investors remained skittish days before crucial sales of sovereign debt from Spain and Italy, two of the region's larger economies.

Investors stayed focused on the outlook for the euro zone economy, government debt sales and how the region's banks will raise much needed capital to repair their balance sheets in the wake of poor reception for a rights issue by UniCredit, Italy's biggest bank.

The euro was up 0.1 percent at $1.2783, underpinned by a solid Austrian bond sale, which was little influenced by the country's heavy exposure to Hungary, and by data showing a surprise jump in French industrial output in November.

A well-received Greek bill auction, lower euro zone spreads and news that Fitch is unlikely to downgrade France's top AAA rating in 2012 also boosted sentiment and the euro.

Recent developments seem to suggest that activity in the biggest EMU countries is not on the verge of a full-blown collapse, said Annalisa Piazza, economist at Newedge strategy.

In Latin America, Brazil's real led the region's currencies up against the dollar on Tuesday as growing pools of investment capital, falling world interest rates and growth in the United States and China boosted the outlook for emerging markets.

The real gained 1.76 percent to 1.8021 to the dollar.

U.S. government debt prices fell as stocks rallied and the more subdued jitters about Europe pared safe-haven demand for bonds ahead of a $32 billion auction of three-year notes.

The pullback in the Treasuries market was modest. Benchmark yields remained stuck in the 2 percent area on expectations that slow growth and low inflation would prevail in the United States and the euro zone debt crisis would continue.

The 'risk-on' sentiment is weighing on bonds and the upcoming supply argues for a steeper yield curve, said Carl Lantz, chief U.S. interest rate strategist at Credit Suisse in New York.

The benchmark 10-year U.S. Treasury note was down 5/32 in price to yield 1.97 percent.

Brent crude oil rose to above $113 a barrel on tension over Iran's nuclear program and unrest in Nigeria.

Iran has begun enriching uranium deep inside a mount and has sentenced an American to death for spying, angering the West and undermining expectations that diplomacy could avert further sanctions or even war.

Brent crude oil rose $1.03 a barrel to $113.48 a barrel. U.S. crude oil was up $1.55 to $102.86.

Spot gold prices rose $24.45 to $1,635.40 an ounce.