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The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment came in at 74.5, up from 71.6 in November.

It was slightly below the median forecast of 74.7 among economists polled by Reuters.

"The overall tenor of news about recent economic developments was on balance more favorable than at any time during the past six years," wrote Richard Curtin, the survey's director.

Twenty-seven percent of consumers spontaneously reported upbeat news about employment gains, the highest proportion since 1983, he wrote.

The survey's barometer of current economic conditions was 85.3 in December, up from 82.1 percent in November but below a forecast of 86.

The survey's gauge of consumer expectations, which more closely projects the direction of consumer spending, rose to 67.5, also the highest level since June. That was above November's 64.8 percent, and in line with expectations.

Households said they expect an inflation rate of 3 percent a year from now, unchanged from November. Americans' forecast for inflation over the next five years held at 2.8 percent for a third month in a row.

(Reporting by Kristina Cooke, Editing by Chizu Nomiyama)

Energy shares will be in the spotlight as oil prices climbed to near a two-year high on Thursday, boosted by an unexpected surge in global demand that has fueled the biggest drop in U.S. crude oil stockpiles in more than a decade.

Bed Bath & Beyond (BBBY.O) beat quarterly profit estimates and gave a strong outlook for the period covering the holidays as U.S. consumers spent more on their homes, sending its shares up.

Rovi Corp (ROVI.O) will pay $720 million in cash and stock to buy Sonic Solutions (SNIC.O), which owns the popular digital video player software DivX, in a bid to broaden its footprint across the digital entertainment space.

Defense contractor Raytheon Co (RTN.N) recommended on Wednesday that shareholders reject an unsolicited "mini-tender offer" by TRC Capital Corp to buy up to 2 million common shares, or about 0.5 percent of its outstanding stock.

South Korean President Lee Myung-bak said its military should launch a "merciless counter-attack" if its territory is attacked again by North Korea, as Seoul's military held major land and sea exercises on Thursday. North Korea responded to the show of military might by denouncing its neighbor as a warmonger, but stopped short of threatening a retaliatory strike as tensions simmered following the North's shelling of a southern island last month.

European shares inched higher in morning trade, extending their sharp December rally as buoyant oil prices boosted energy shares such as BP (BP.L) and ENI (ENI.MI). At 0833 GMT (3:33 a.m. ET)the FTSEurofirst 300 .FTEU3 index of top European shares was up 0.05 percent at 1,148.11 points, on track to record its best monthly performance since mid-2009.

The S&P 500 rose on Wednesday to its highest level since the collapse of Lehman Brothers, led by bank stocks that have leapfrogged other sectors in December.

The Dow Jones industrial average .DJI added 26.33 points, or 0.23 percent, to 11,559.49. The Standard & Poor's 500 Index .SPX gained 4.24 points, or 0.34 percent, to 1,258.84. The Nasdaq Composite Index .IXIC edged up 3.87 points, or 0.15 percent, at 2,671.48.

(Reporting by Blaise Robinson; Editing by Greg Mahlich)

Rio's first big acquisition since its ill-timed Alcan buy in 2007 is a play on soaring Asian demand for the key steel-making ingredient, but needs the backing of at least one of Riversdale's three large shareholders, including India's Tata Steel (TISC.BO) and Brazilian steel group CSN (CSNA3.SA).

While fund managers said the steelmakers may oppose Rio's offer, Riversdale's Managing Director Steve Mallyon told Reuters he expected a positive response.

The company's third largest shareholder, U.S.-based fund Passport Capital, had committed an unspecified number of its shares to a pre-bid agreement that gives Rio Tinto options over 14.9 percent of Riversdale's stock, Mallyon said.

"There has been no reaction either way although Passport has put some of its shares into the pre-bid agreement," Mallyon told Reuters. "I would think the reaction from CSN and Tata would be generally positive."

Tata Steel, whose Riversdale board nominee abstained from voting on the bid, declined to comment.

Rio, which wants access to Riversdale's coking coal deposits in Mozambique, raised its offer to A$16 per share cash on Thursday from an earlier indicative bid of A$15.

Resuming trade after a two-day suspension, Riversdale's shares closed 1.7 percent firmer at A$16.57, indicating investors were expecting a higher offer.

"I think there is a strong potential (for rival bids)," said Andrew Harrington, an analyst at Paterson Securities in Sydney.

"There aren't that many big new coking coal assets out there and this one is very large and it's near to production."

A group of state-run Indian firms including NTSC (NTPC.BO) have indicated they were looking at Riversdale, with a source at a member of the consortium telling Reuters on Wednesday it would decide soon whether to bid.

Other interested parties taking a look at Riversdale include Anglo American (AAL.L), ArcelorMittal (ISPA.AS) and Strata (XTA.L), sources familiar with the matter and fund managers have said.

Riversdale had held discussions with a number of parties on potential partnerships but was not in takeover talks with anyone else, Mallyon said, before heading to the beach after intensive negotiations to secure a deal with Rio ahead of the Christmas break.

"I've got the board on the (car) roof. When I told everyone I was going to a board meeting it wasn't the kind they were thinking about. I am ready for a nice surf," he said.

Rio needs acceptances from 50 percent of Riversdale shareholders, which would require getting agreement from at least one of the three big shareholders that together own about half of the company, according to Reuters data.

Riversdale's executive chairman and founder Michael O'Keeffe and Mallyon have offered their shares into the pre-bid agreement.