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The move will create a media group that will have a combined base of 117 million visitors a month in the United States, and reach 270 million people globally, AOL said in a statement.

The deal follows efforts by AOL's chief executive Tim Armstrong to turn around the dial-up Internet access business by trying to turn it into a media and entertainment powerhouse, despite difficulties in attracting investors.

AOL suffered sharp declines in advertising sales and dial-up subscriptions in the fourth quarter of 2010, driving overall revenue down 26 percent.

Arianna Huffington, co-founder of The Huffington Post, said on her blog that she would lead a newly formed The Huffington Post Media Group, which will integrate all Huffington Post and AOL content, as its president and editor-in-chief.

"By combining HuffPost with AOL's network of sites, thriving video initiative, local focus and international reach, we know we'll be creating a company that can have an enormous impact, reaching a global audience on every imaginable platform," she said.

Approximately $300 million will be paid in cash in the purchase, which has been approved by the boards of directors of both companies and shareholders of The Huffington Post, though it still needs government approvals, AOL said.

The deal, expected to be closed in the late first, or early second quarter of 2011, will combine AOL's infrastructure and scale with The Huffington Post's pioneering approach to news and innovative community building, AOL said.

"The acquisition of The Huffington Post will create a next-generation American media company with global reach that combines content, community and social experiences for consumers," Armstrong said in the statement.

HUFFPOST EXPANSION

AOL said the acquisition would accelerate its strategy to deliver an array of premium news, analysis and entertainment.

The Huffington Post, started in 2005, has grown into one of the most heavily visited news websites in the United States.

"The Huffington Post has already been growing at a prodigious rate. But my New Year's resolution for 2011 was to take HuffPost to the next level -- not just incrementally, but exponentially," Huffington said in her blog.

She said the Huffington Post decided early this year to expand into more local news coverage, launch international sections (starting with HuffPost Brazil) and increase original video content.

Purchase by AOL, with its network of blogs such as AutoBlog, Music, AOL Latino, Black Voices, its local news operation Patch.com and new video-production studios, will allow these goals to be met, she said

Oil prices were also higher, while the euro fell to a two-week low against the dollar after a bigger than expected fall in German industrial orders.

World equities as measured by the MSCI All-Country World Index advanced 0.2 percent after gaining 2.2 percent last week. The index is up 3.4 percent so far this year, while MSCI emerging markets index is down 2 percent.

"At the moment, clients are feeling that any dips can be bought into and the trend is an upwards one, and I can't see that being thrown off course in the short term," said Giles Watts, head of equities at City Index in London.

Concerns over higher inflation in booming emerging markets, further indications of economic recovery gathering pace in the United States, modest valuations and tentative signs of stability in the euro zone sovereign debt crisis have fueled the outperformance of shares in developed markets.

Data from fund tracker EPFR Global showed investors pulled out $7 billion from emerging markets equity funds in the week of Feb 4, their biggest outflow in three years.

The U.S. S&P 500 and Dow Jones industrial average hit new 2-1/2-year highs on Friday as a fall in U.S. unemployment raised optimism of a labor market recovery.

U.S. stock index futures put on 0.3 percent, indicating a firm open on Wall Street. The pan-European FTSEurofirst 300 rose 0.9 percent on Monday, while Germany's DAX added 0.9 percent, shrugging off the news that German industrial orders fell by 3.4 percent on the month in December. Japan's Nikkei average put on 0.5 percent, hitting a nine-month high.

In terms of valuations, the S&P 500 carries a 12-month forward price-to-earnings ratio of 13.3 times, compared with a 10-year average of 15.5 though more expensive than the emerging markets index's 11.3 times, Thomson Reuters Datastream shows.

TREASURY YIELDS UP

As optimism over the U.S. economic recovery grew, investors were also shifting away from government bonds.

Yields on benchmark 10-year Treasuries rose 3 basis points to 3.6701 percent, their highest level since early May and up about 28 basis points since the start of the month.

"Investors are now reflecting that an ever-improving outlook for the U.S. is a new factor in the equation, which is weighing quite heavily on U.S. Treasuries," said Kornelius Purps, strategist at Unicredit in Munich.

"We have not only the (non-farm) labor report -- which was a mixed bag but seen as a positive -- we have the ISM, which were extremely positive and indicate the U.S. economy is recovering at quite a healthy clip."

Spreads on 10-year Portugese government bonds over benchmark German Bunds rose 5 bps to 386 bps, though still down about 8 bps since the beginning of the month, after Portugal, one of the weakest euro zone economies, planned a five-year syndicated bond.

The S&P 500 .SPX posted its best week in nine on Friday as investors rotated into defensive and lagging sectors, with both the Dow Jones .DJI and the S&P 500 making new 2 1/2-year highs. Analysts see further gains in store for equity markets as economic growth accelerates.

Some confidence in the recovery in the labor market was fueled by data on Friday that showed U.S. unemployment fell to 9 percent, its lowest level since April 2009, though the economy only added a weaker-than-expected 36,000 jobs.

In company news, France's Sanofi-Aventis (SASY.PA) and U.S. biotech Genzyme (GENZ.O) kept investors in suspense about their $20 billion transatlantic pharmaceuticals merger on Monday, as sources predicted a deal within days.

Nasdaq OMX Group (NDAQ.O) said on Saturday that it found "suspicious files" on its U.S. computer servers, but said there was no evidence hackers had accessed or acquired customer information or that its trading platforms were compromised.

Struggling U.S. Internet company AOL Inc (AOL.N) has agreed to buy The Huffington Post, the influential and rapidly growing news, analysis and lifestyle website, for $315 million, it said on Monday.

U.S. regulators will propose on Monday that executives at the largest financial institutions have half of their bonuses deferred for at least three years as part of efforts to curb excessive risk taking, according to two people familiar with the proposal.

Google Inc (GOOG.O) wants to avoid a lengthy legal battle with European Union regulators investigating its market dominance, the Sunday Telegraph quoted its chief executive as saying.

Time Warner Cable Inc (TWC.N) is considering selling part of its IPC Media magazine unit, British newspaper The Telegraph reported on its website on Sunday.

Ford Motor Co (F.N) will increase production for deliveries to its U.S. dealers by 13 percent in the first quarter of 2011 and may add third shifts to some of its plants, Ford sales executives said on Sunday.

In European equity markets, the FTSEurofirst 300 .FTEU3 rose 1 percent in early trade, with oil majors among the gainers.

North Sea Brent crude oil futures jumped back above $100 a barrel on lingering worries that political unrest in Egypt could spread to other markets of the Middle East and disrupt energy supplies.

(Reporting by Harpreet Bhal; Editing by Will Waterman)

Talks about a possible takeover by the world's sixth-largest drugmaker continued into the week despite earlier expectations that the two sides would hammer out a reconciliation at the weekend, following a testy courtship drawn out over months.

Shares in Sanofi rose at the opening of Paris trading, indicating investors remained confident a deal would go ahead.

"We should not over-interpret what's happening," said Justin Smith, analyst at UK brokerage MF Global. "In the end this is a complicated negotiation; it's a large transaction and they should take their time and be thoughtful about it."

Sanofi rose about 1 percent in early trading, outperforming a slightly firmer market. At 0840 GMT the French company's shares were up 0.9 percent at 50.73 euros.

Genzyme shares closed at $73.40 a share on Friday.

Buying Genzyme would add rare diseases as a new growth area for Sanofi, which under Chief Executive Chris Viehbacher has been diversifying to reduce exposure to cheaper generic drugs.

Until recently Cambridge, Massachusetts-based Genzyme -- founded in 1981 and one of the first entrants into the young biotechnology sector, which develops drugs from living cells -- had been unwilling to enter negotiations with Sanofi, which responded by launching a hostile $69-a-share bid in October.

Sources familiar with the situation said on Sunday that Sanofi could raise its cash offer to roughly $74 per share or $19.2 billion based on 258.99 million shares outstanding and add a fee tied to the performance of a drug Genzyme is developing.

The fee, called a "contingent value right," or CVR, would have an effective value of $5 to $6 a share.

The CVR would be a tradable security that offers a payout to shareholders over time and in this case would be based on the future performance of Lemtrada, designed to treat multiple sclerosis. If the drug fails, the option would be worth nothing.

Sanofi is due to report its annual results on Wednesday.

Buying Genzyme would be Viehbacher's biggest deal since he took office in December 2008 and Sanofi's biggest since it bought Aventis in 2004. That merger created a powerhouse with blockbusters such as anti-clotting drug Plavix, the world's second best-selling prescribed medicine. But with drugs losing patent protection, Sanofi is being forced to expand.

"It is not illogical that they should be able to reach an agreement around the price levels which are being indicated," said Jean-Jacques Le Fur, analyst at Oddo Securities.

"I have always estimated the transaction would happen between $69 and $75 a share in cash. The CVR should be worth $6 to $8 a share. The operation could be announced the day of Sanofi's results."

The euro recovered after hitting a two-week low on Friday, while oil prices slipped.

World equities as measured by the MSCI All-Country World Index .MIWD00000PUS advanced 0.4 percent after gaining 2.2 percent last week. The index is up 3.6 percent so far this year, while MSCI emerging markets index .MSCIEF is down 1.8 percent.

"At the moment, clients are feeling that any dips can be bought into and the trend is an upwards one, and I can't see that being thrown off course in the short term," said Giles Watts, head of equities at City Index in London.

Concerns over higher inflation in booming emerging markets, further indications of economic recovery gathering pace in the United States, modest valuations and tentative signs of stability in the euro zone sovereign debt crisis have fueled the outperformance of shares in developed markets.

Data from fund tracker EPFR Global showed investors pulled out $7 billion from emerging markets equity funds in the week of Feb 4, their biggest outflow in three years.

The U.S. S&P 500 .SPX and Dow Jones industrial average .DJI hit new 2-1/2-year highs on Friday as a fall in U.S. unemployment raised optimism of a labor market recovery. The pan-European FTSEurofirst 300 .FTEU3 rose 0.9 percent on Monday, while Japan's Nikkei average .N225 put on 0.5 percent, hitting a nine-month high.

In terms of valuations, the S&P 500 carries a 12-month forward price-to-earnings ratio of 13.3 times, compared with a 10-year average of 15.5 though more expensive than the emerging markets index's 11.3 times, Thomson Reuters Datastream shows.

As optimism over the U.S. economic recovery grew, investors were also shifting away from government bonds.

Yields on benchmark 10-year Treasuries rose 5 basis points to 3.6904 percent, their highest level since early May and up about 30 basis points since the start of the month.

"Investors are now reflecting that an ever-improving outlook for the U.S. is a new factor in the equation, which is weighing quite heavily on U.S. Treasuries," said Kornelius Purps, strategist at Unicredit in Munich.

"We have not only the (non-farm) labor report -- which was a mixed bag but seen as a positive -- we have the ISM, which were extremely positive and indicate the U.S. economy is recovering at quite a healthy clip."

The euro was up 0.3 percent at $1.3621 and 0.4 percent at 112.04 yen, while the dollar .DXY eased 0.2 percent against a basket of major currencies.

Copper put on 0.8 percent to a record high of $10,130 a tonne, while oil eased 0.2 percent to below $89 a barrel.

(Additional reporting by Simon Jessop, William James and Neal Armstrong; Editing by Hugh Lawson)