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The boost in consumer confidence on the back of an improving jobs outlook was another indication consumers are willing to spend over the holidays while a rise in exports looks set to lift economic growth this quarter.

The data fits into a pattern of an economy that is gaining traction after a slowdown in the summer and is likely to intensify the debate over whether the Federal Reserve needs to keep stimulating the economy through asset purchases.

"We are in the gradual recovery camp and are definitely on the upper side of that now," said Pierre Ellis, senior global economist at Decision Economics in New York. "It adds to a growing number of economic indicators that are looking better than expected."

Consumer sentiment in December rose to its highest level since June and was at its third-highest since the start of 2008, according to a Thomson Reuters/University of Michigan survey. Government data showed U.S. exports in October rose a robust 3.2 percent while imports declined slightly.

U.S. stock indexes closed higher, with the S&P 500 at its highest level since the week Lehman Brothers collapsed in 2008. U.S. Treasury bond prices lost ground while the dollar gained.

The survey's preliminary December reading for consumer sentiment came in at 74.2, up from 71.6 in November. That was above the median forecast of 72.5 among economists polled by Reuters.

Consumers cited a more favorable jobs outlook, chiming with recent data pointing to some improvement in the labor market. But slow jobs growth and high unemployment is still one of the biggest impediments to the recovery.

Although the unemployment rate edged up to 9.8 percent in November, new claims for unemployment benefits fell more than expected last week and the four-week moving average slipped to a fresh two-year low.

Federal Reserve Chairman Ben Bernanke has hinted that the U.S. central bank may increase its current $600 billion bond purchasing program if unemployment continues to stay high.

The sentiment survey's barometer of current economic conditions rose to its highest since January 2008, just after the economic downturn began. The index for December came in at 85.7, up from 82.1 in November and above a forecast of 83.1.

Meanwhile, the U.S. trade deficit for October totaled $38.7 billion, down from a revised estimate of $44.6 billion for September. Analysts surveyed before the report had expected the deficit to narrow just slightly to about $43.60 billion.

Record exports to China and Mexico helped push the overall export tally to $158.7 billion, the highest since August 2008. Exports to the European Union and Japan also grew.

Despite record exports to China in October, the U.S. trade deficit with that country in the first 10 months of 2010 was $226.8 billion, up 20.3 percent from the year-earlier period.

The sharp rise is likely to keep China's trade and currency policies on the minds of U.S. lawmakers in 2011.

Irving Picard, the lawyer recovering money for the victims of Madoff's decades-long multibillion dollar fraud, sued Kohn and the bank she founded, Bank Medici, as well as Italy's UniCredit and its unit, Bank Austria, and 53 other defendants.

The complaint in U.S. Bankruptcy Court in New York said the litigation seeks to recover $19.6 billion in damages. Since Madoff's arrest two years ago, Kohn has not traveled to New York, where she first met Madoff in 1985 and they became business partners, the 161-page complaint said.

Separate lawyers representing Kohn and Bank Medici, now known as 2020 Medici, were not available to comment.

Picard's complaint said that Kohn's denial to Austrian authorities that she was close to Madoff, was false.

"In Sonja Kohn, Madoff found a criminal soul mate, whose greed and dishonest inventiveness equaled his own," Picard said in a statement. Her husband, her mother and son and daughter were also named as defendants in the lawsuit.

Some of them invoked their Fifth Amendment Rights to remain silent hundreds of times when they were deposed by the trustee, the court document said.

It said even after Madoff's arrest, Kohn laundered hundreds of thousands of dollars through various sham entities. "This dissipation is ongoing," Picard claimed.

The liquidator of BLMIS has filed a blizzard of lawsuits in recent weeks to meet a mid-December legal deadline, the second anniversary of Madoff's arrest.

Madoff, 72, is serving a 150-year prison sentence after pleading guilty in March 2009 to orchestrating a massive Ponzi scheme in which early investors were paid with the money of new clients and almost no actual trading took place.

"THE MEDICI ENTERPRISE"

The complaint dubbed Kohn's part "The Medici Enterprise" and a "deliberately Byzantine structure," and said elements had been "purposefully concealed" from the trustee, United States and other law enforcement authorities.

"We believe that even more information regarding the full scope of this criminal enterprise will be revealed," Picard said.

Separately on Friday, Picard said that his team of lawyers at Baker & Hostetler LLP had reached settlements totaling $80 million with an undisclosed number of charities and nonprofit organizations that withdrew more than they deposited in Madoff's firm.

Overall, about $2.6 billion has been recovered. The trustee and his lawyers have sued individual investors, hedge funds and banks for amounts totaling about $51 billion. They said on Friday that the estimate of the total lost in the Ponzi scheme is approximately $19.6 billion.

Consumer sentiment in December rose to its highest level since June and was at its third-highest since the start of 2008, according to the Thomson Reuters/University of Michigan survey. Government data showed U.S. exports in October rose a robust 3.2 percent while imports declined, which may bode well for fourth quarter economic growth.

The consumer sentiment report was another sign consumers could be ready to spend this holiday season.

"This is an indication of the favorable development we are seeing so far with the year-end holiday shopping season," said Pierre Ellis, senior global economist at Decision Economics in New York. "It adds to a growing number of economic indicators that are looking better-than-expected".

The survey's preliminary December reading for consumer sentiment came in at 74.2, up from 71.6 in November. That was above the median forecast of 72.5 among economists polled by Reuters.

Chiming with recent signs of improvement in the labor market, consumers cited more favorable news about changes in the employment situation. Slow jobs growth is seen as one of the biggest impediments to economic recovery.

At the same time, the survey's barometer of current economic conditions rose to its highest reading since January 2008, just after the economic downturn began. The index for December came in at 85.7, up from 82.1 in November and also , above a forecast of 83.1.

Although the unemployment rate edged up to 9.8 percent in October, weekly data have shown new U.S. claims for unemployment benefits fell more than expected last week and the four-week moving average slipped to a two-year low.

The sentiment survey was taken before a tentative deal on extended tax cuts reached earlier this week. However, compilers point to a widespread expectation the cuts would be extended and say confidence could fall again if the cuts are blocked.

Meanwhile, the U.S. trade deficit for October totaled $38.7 billion, down from a revised estimate of $44.6 billion for September. Analysts surveyed before the report had expected the deficit to narrow just slightly to about $43.60 billion.

The smaller-than-expected deficit could boost estimates for U.S. fourth-quarter economic growth because it implies a larger share of U.S. demand is being met by domestic production.

Imports declined slightly in the face of slackening demand for industrial and petroleum products, the report from the Commerce Department showed.

"This suggests that the economy is accelerating," said Neil Dutta, an economist at Bank of America Merrill Lynch in New York, raising his forecast of fourth-quarter economic growth to about 3.0 percent.

But one big reason the trade deficit is shrinking is "because we're still in a slower-growth economy. You'd imagine that a smaller number would be a good thing, but it's because people still have to contend with a slower economy" said Robert Pavlik, chief market strategist at Banyan Partners in New York.

U.S. stock indexes were marginally higher after the reports, hovering close to new recent highs. U.S. Treasury bond prices added to losses while the dollar gained.

International trade data for October will be released at 1330 GMT. Economists in a Reuters survey forecast a $43.6 billion deficit, compared with a $44 billion deficit in September.

Thomson Reuters/University of Michigan Surveys of Consumers release preliminary December consumer sentiment index at 1455 GMT. Economists expect a reading of 72.5, compared with 71.6 in the final November report.

Resource-related stocks will be in focus as data showed China's imports and exports were much stronger-than-expected in November, robust numbers that could clear the way for the central bank to raise interest rates as soon as this weekend.

U.S. aviation regulators are drafting enhanced inspection mandates to step up their examinations of more than 600 Boeing Co's (BA.N) 757 airplanes worldwide, the Wall Street Journal reported, citing people familiar with the matter.

At 1530 GMT, Economic Cycle Research Institute (ECRI) releases its weekly index of economic activity for the week ended Dec 3. In the prior week the index read 125.4.

Bank of America Corp (BAC.N) restarted about 16,000 home foreclosure cases across the United States on Monday, the Wall Street Journal said.

Component suppliers for Apple Inc's (AAPL.O) iPad are gearing up for a new round of production in the first quarter, sources said on Friday, with one saying the product will be a revamp of the popular tablet computer including front and back-mounted cameras.

Shares in Netflix (NFLX.O), F5 Networks (FFIV.O), Newfield Exploration (NFX.N) and Cablevision Systems (CVC.N) were up 3.8 to 5.7 percent in extended trade on Thursday as the companies will join the S&P 500 after trading closes on December 17.

Sanofi-Aventis SA (SASY.PA) will likely buy time by extending its $18.5 billion cash offer for Genzyme Corp (GENZ.O) and try to hammer out a deal that may involve a higher pay-out if the U.S. biotech meets milestones.

The French drugmaker's tender offer for Genzyme ends at 11:59 p.m. New York time on Friday. Sanofi, which is expected to extend the offer by 50 days, must make a statement before the U.S. stock markets open on Monday.

Japan's Nikkei average .N225 closed down 0.7 percent on Friday, while European shares were flat in early trade, with banks down and automakers up.

On Thursday, the Dow Jones industrial average .DJI dipped 2.42 points, or 0.02 percent, to 11,370.06. The Standard & Poor's 500 Index .SPX gained 4.72 points, or 0.38 percent, to 1,233.00. The Nasdaq Composite Index .IXIC rose 7.51 points, or 0.29 percent, to 2,616.67.

(Reporting by Atul Prakash; Editing by Will Waterman)

The robust data released on Friday also offered a double dose of good news for the global economy: a reminder that Chinese demand was still growing apace and an indication that the U.S. and European recoveries were picking up steam.

China has been slow to tighten monetary policy this year, partly for fear of a double-dip recession in the developed world.

But with Chinese inflation running at its fastest clip in more than two years, analysts are now looking for the world's second-largest economy to unleash a more aggressive mix of rate rises, currency appreciation, lending restrictions and higher reserve requirements for banks.

"From every angle, the case for further liquidity and credit tightening, as well as rate hikes and appreciation are pretty strong," said Tao Wang, economist with UBS in Beijing.

Another strong month for China's trade surplus, meanwhile, could fuel fresh international criticism of its exchange rate regime. The United States and Europe say that an undervalued currency gives Chinese exporters an unfair advantage in global markets

November imports rose 37.7 percent from a year earlier, easily topping forecasts for a 24.2 percent increase, powered by China's voracious appetite for commodities.

Chinese imports have developed a habit over the past two years of surprising on the upside. In that respect, the 34.9 percent jump in exports, above market expectations for a 22.0 percent increase, was the bigger surprise.

"The rise in exports appeared to be driven by rush orders just ahead of the Christmas period," Mingchun Sun and Kevin Lai, economists at Daiwa Capital Markets, said in a note.

Evidence for that view was in the fact that shipments of final goods to markets such as Europe and the United States outstripped those of intermediate goods to Asia.

"It remains to be seen, of course, whether this can be sustained," they added.

Exports to the United States were up 32.2 percent, while shipments to the European Union, China's biggest trading partner, climbed 33.8 percent.

The rise in exports left China with a hefty surplus of $22.9 billion in November, the seventh straight month of impressive trade performance. During that stretch, its average surplus has been $22.2 billion.

The trade data boosted the main Chinese stock index by 1.1 percent though investors remained cautious ahead of inflation data to be released over the weekend. The Shanghai index had been flat before the release of the data.

PRESSURE ON YUAN