US STOCKS-Futures rise on China PMI; factory data on tap

* Bank of America to take mortgage settlement charge

* China data eases fears of more monetary tightening

* Futures up: Dow 91 pts, S&P 10.3 pts, Nasdaq 24 pts

* For up-to-the-minute market news see [STXNEWS/US]

NEW YORK, Jan 3 (Reuters) - U.S. stock index futures rose on Monday on hopes the rally will continue in the new year as economic conditions continue to improve and as Chinese factory inflation tempered concerns of more monetary tightening.

Investors awaited the Institute of Supply Management's manufacturing survey, due at 10 a.m. EST (1500 GMT), for fresh evidence on the health of the economy. Economists polled by Reuters forecast the ISM's high-profile measure of U.S. factory activity edging higher to 56.9 from 56.6.

"The New Year is starting off as expected, with a fresh surge showing enthusiasm and optimism for a solid market," said Andre Bakhos, director of market analytics at Lek Securities in New York.

"This reflects the better economic backdrop that we've seen, as many look at early January to be a barometer for the year ahead, and it appears we are starting off on the right foot."

The official Chinese purchasing managers' index edged down in December from November and fell short of forecasts, easing concerns that rising inflation would lead the government to take more steps to control growth. For details see [ID:nTOE6BU02S]

S&P 500 futures gained 10.3 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures jumped 91 points, and Nasdaq 100 futures rose 24 points.

U.S. stocks ended the year with double-digit gains, with the S&P 500 <.SPX> recording its best December since 1991. The gains marked a recovery to levels before the collapse of Lehman Brothers in September 2008. For the year, the S&P rose 12.8 percent, the Dow Jones industrial average <.DJI> climbed 11 percent, and the Nasdaq <.IXIC> surged 16.9 percent.

From its July low the S&P has risen 23 percent, boosted by improving economic data, positive earnings reports and stimulus measures by the U.S. Federal Reserve. Investors returning from the holidays will closely watch a host of economic data this week for signs of improvement in the economy to justify the gains.

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For factbox on S&P 500 winners and losers in 2010, see [ID:nN31141356] Consumer shares lead S&P, US stocks shine in 2010,[ID;nN31145214] Caterpillar leads blue chip advance in 2010, [ID:nN31145176]

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Other data expected at 10 a.m. (1500 GMT) includes construction spending for November, seen showing an increase of 0.2 percent, according to forecasts.

Bank of America will put aside $3 billion in the fourth quarter related to poorly underwritten mortgages it sold to Fannie Mae and Freddie Mac after the bank agreed to settle claims over the repurchase of those loans. Bank of America shares were up 4.1 percent to $13.88 in premarket trading. [ID:nN03172504]

IPhone users complained of malfunctioning alarms on the first working day of 2011, even after Apple Inc claimed the phones' built-in clocks will work from Monday. Apple shares edged up 0.9 percent to $325.47 premarket. [nTOE70201A]

European shares rose on the first trading day of the year, led by gains in automakers after Porsche won a legal challenge from U.S. hedge fund groups. [.EU] (Reporting by Chuck Mikolajczak; editing by Jeffrey Benkoe)