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Shares in Borders Group Inc (BGP.N) will be in the spotlight after the company, which has been seeking financing to fight credit woes, said late on Monday that two top executives resigned, sending its shares falling 8 percent after-hours. Borders shares traded in Frankfurt (BGP.F) were down 4.2 percent.

Japanese stocks led Asian equities higher on Tuesday, and oil prices hovered near a 27-month high, as investors bet the improving U.S. recovery may be reflected in monthly jobs data later in the week.

European stocks were up 0.7 percent in morning trade, with oil major BP (BP.L) hitting a six-month high, up 4.9 percent, after The Daily Mail newspaper reported rival Royal Dutch Shell (RDSa.L) had considered a takeover bid during the Gulf of Mexico oil spill.

The dollar edged broadly higher on Tuesday, with the yen on the back foot after upbeat U.S. data suggested the world's biggest economy will accelerate in 2011.

Miners will be in focus as floodwaters eased in Australia's major coal mining region on Tuesday, allowing some mines to slowly resume production although most remained idle, as devastating floods affect some 200,000 people and force towns to be evacuated.

General Motors (GM.N) said on Tuesday it sold 2.35 million vehicles in China in 2010, up 28.8 percent from a year earlier.

Economic data on tap on Tuesday includes factory orders for November, while Federal Reserve issues minutes from its meeting of December 14.

Investors will also keep a close eye on monthly auto sales figures. Fifteen economists surveyed by Reuters forecast December auto sales of about 12.3 million on the annualized and seasonally adjusted basis tracked by the industry.

U.S. stocks greeted the new year with a rally on Monday as encouraging signs about the outlook for manufacturing around the world prompted investors to inject new money into the market.

The Dow Jones industrial average .DJI gained 93.24 points, or 0.81 percent, to 11,670.75. The Standard & Poor's 500 Index .SPX rose 14.23 points, or 1.13 percent, to 1,271.87. The Nasdaq Composite Index .IXIC climbed 38.65 points, or 1.46 percent, to 2,691.52.

(Reporting by Blaise Robinson; Editing by Hans Peters)

Rival Borders Group Inc (BGP.N), which has been seeking financing to fight credit woes, said on Monday that two top executives resigned. Its shares fell 8 percent after-hours.

Borders has been hurt by an industry-wide decline in sales of physical books and has not developed an e-reader to compete with Amazon's popular Kindle device.

Barnes & Noble said that same-store sales, or sales at superstores open at least 15 months, rose 9.7 percent for the nine-week period ended on January 1.

Barnes & Noble, which put itself up for sale in August, introduced the Nook in 2009 to compete with Amazon.com Inc's (AMZN.O) market-leading Kindle e-reader as it seeks to prove itself viable amid bookbuyers' shift to digital formats.

In the fall, the retailer introduced a well-reviewed, enhanced version of the device, NookColor, which has some functions similar to those of Apple's (AAPL.O) iPad tablet.

Barnes & Noble in November had forecast same-store sales for the entire current quarter, including the holiday period, would rise between 5 and 7 percent.

Barnes & Noble's numbers include Nook devices sold in stores but not on its website. Last week, Barnes & Noble, which operates 717 namesake stores in the United States, said the Nook had become its best-selling single item ever. The retailer said it would release more detailed sales figures on Thursday.

Barnes & Noble stands to win market share from smaller rival Borders, which said last week it would delay payments to some vendors as it seeks to negotiate new loan terms, putting into question publishers' willingness to ship it new books.

According to the Wall Street Journal, Rowman & Littlefield Publishing Group Inc, which publishes its own titles and distributes books for several hundred publishers through its National Book Network, said it would temporarily stop shipping books to Borders.

The New York Times reported that a spokesman for Ingram Book Company, a major book wholesaler, said on Monday the company was still shipping books to Borders.

Last week, Borders said it was delaying payments to some of its vendors, just weeks after the company said it was trying to obtain new financing to avoid violating the terms of its credit agreements early in 2011.

BORDERS' TROUBLES AGGRAVATE

Standard & Poor's analyst Michael Souers downgraded Borders' shares to "sell" from "hold," saying that even if Borders manages to restructure its debt, the new terms would be "onerous."

Souers called Borders' situation "dire" and said its current crisis could benefit Barnes & Noble permanently. He said Borders' lack of a proprietary e-reader was damaging.

Wall Street analysts expect top U.S. chains to report that sales at stores open at least a year, or same-store sales, rose 3.3 percent in December.

That would come on top of a 2.9 percent jump a year earlier, when the economic recovery started taking hold, but slower than the 6 percent increase reported for November.

Shoppers turned out in greater numbers this year, buoyed in part by pent-up demand after two seasons of frugality and a general sense that the economy is finally improving.

Still, Wall Street is fretting that shoppers will put their wallets away for a while, now that Christmas is over.

"People have tended to shop during the times they need to, like holidays or back to school," said Nomura analyst Paul Lejuez. "During off periods, they haven't been coming out."

Deeming the holidays a success will hinge on whether department stores, teen apparel chains and others were able to lure shoppers without going overboard with promotions.

"A good December might not mean a great January, February, March," Lejuez said.

Chains such as Target Corp, TJX Cos Inc, J.C. Penney Co Inc and Abercrombie & Fitch Co will report sales numbers on Wednesday and Thursday.

Analysts are watching this week's reports for changes to sales and profit forecasts. They want to know whether the December sales gains were "bought" with profit-eroding price slashing, in which case retailers might hold off on raising their own profit forecasts even if sales are up.

So far, though, most analysts say the season's discounting was not out of line.

Last week's massive blizzard that dumped as much as three feet of snow on parts of the U.S. Northeast likely put a small dent in December sales. Research firm ShopperTrak has estimated that $1 billion in retail sales may have been postponed due to the storm. International Council of Shopping Centers chief economist Michael Niemira told Reuters the snowstorm could lower the December sales growth rate by 0.5 percentage point, though some purchases may show up in January.

February's Valentine's Day is important for specialty retailers such as jeweler Tiffany & Co, but retailers have to wait until Easter, in late April, for the next major shopping occasion.

The spending recovery helped the S&P Retail Index rise 23.4 percent in 2010, compared to the broader S&P 500's increase of 11.7 percent. However, the index has stalled since early December on fears the rally has run out of steam.

(For a graphic comparing same-store sales and the S&P Retail Index please see: r.reuters.com/teb54r )

Japanese shares hit a 7- month high on Tokyo's first trading session of the New Year, a day after the United States reported manufacturing grew at its fastest clip in seven months in December. U.S. stocks hit new two-year highs overnight. .N

The next big test for the U.S. economy comes later this week when the government will publish its December jobs report.

"Market players are now focusing on the U.S. payrolls data due on Friday, which will likely have an impact on both Wall Street shares and the dollar/yen rate," said Kazuhiro Takahashi, general manager at Daiwa Capital Markets in Tokyo.

The Nikkei .N225 rose 1.7 percent, led by shares in resource companies as oil and commodity prices rose on the stronger economic growth outlook this year.

Stocks are also getting a boost from the "January effect" when fund managers are no longer distracted by year-end window dressing and instead focus on stocks they find attractive, traders said.

The MSCI index of shares excluding Japan .MIAPJ0000PUS was 0.21 percent higher, led by advances in the South Korean KOSPI .KS11 and the Shanghai Composite Index .SSEC, where property stocks jumped 5 percent as worries about further monetary tightening eased after surveys indicated that Chinese factory inflation may be abating.

Accelerating inflation and record house prices have led China's central bank to signal time and again in recent months that the country needs "prudent" monetary policy to curb price pressures and prevent asset bubbles.

But a fall in the official purchasing managers' index in December over the previous month held out hope that inflation, running at its highest in over two years, may be peaking soon.

Still, investor Jim Rogers said inflation remained a top concern for Chinese policymakers.

"But I think they'll be more tightening in China because the Chinese do have a serious inflation problem as you mentioned they know what I know and everybody knows it. And they're determined to kill it," he told Reuters Insider TV.

While the mood was upbeat across much of Asia, shares in Australia slipped into negative territory and both the Australian and New Zealand dollars were under pressure because of worries over the impact of floods in northeast Australia.

Heavy flooding in Queensland has cut coal exports and hurt wheat production. Miners such as Rio Tinto (RIO.AX) have declared force majeure and cut coal exports to a trickle.

"The lights were flashing a very verdant green at the start of the session but now it has fizzled. I suspect it will come back a bit later," said Michael Heffernan, strategist at Austock Group.

"The floods are likely to have some impact on coal stocks."

DOLLAR GAINS, TREASURIES DECLINE

Prosecutors accuse Winifred Jiau of selling inside information about publicly traded companies, including computer chipmakers Marvell Technology Group Ltd and Nvidia Corp to hedge funds, including the founder of a New York fund that prosecutors did not identify.

Federal prosecutors in New York are also involved in talks that could lead to a possible "disposition" of charges filed against a former executive with expert network firm Primary Global Research.

In a court filing last week, prosecutors disclosed that, as recently as December 22, they had "negotiations" with the lawyer for Don Chu, a Primary Global executive, who was arrested November 24 at his New Jersey home.

The prosecutors cited the ongoing negotiations as a reason for requesting additional time to decide whether or not to indict Chu, who was the first person arrested in this new round of expert network cases.

A federal judge has given federal authorities until January 27 to decide whether or not indict Chu.

Prosecutors allege Jiau sold information through an expert network firm, in exchange for more than $200,000 of payments funneled through that firm.

Primary Global has said it used Jiau from September 2006 until December 2008. The period roughly corresponds with the time frame in which prosecutors said Jiau's alleged illegal activity took place.

Jiau also worked for a different research firm, Vista, before Primary Global, her lawyer Mark Goldrosen said outside court on Monday.

Another figure caught up in the widening insider trading probe, Daniel DeVore, also did work for both Primary Global and Vista, according to court papers.

DeVore, a former Dell Computer employee, has pleaded guilty and is cooperating with the government.

A representative for Guidepoint Global, which acquired Vista in 2009, could not immediately be reached.

Last week a different magistrate granted Jiau $250,000 bail, but she was held in a California jail over the weekend because the person who initially agreed to co-sign the bond pulled out.

Jiau reappeared in court on Monday wearing a yellow prison jump suit and glasses. Assistant U.S. Attorney Wilson Leung argued against releasing her, saying she began pulling out of her driveway as federal agents pounded on her door.

But Goldrosen said Jiau, 43, was on her way to run errands and had not heard the agents. Once she saw them, she fully cooperated, Goldrosen said.