European stocks fell and the euro rose against the dollar on Thursday after European Commission President Jose Manuel Barroso urged EU leaders to seek compromise on the debt crisis before a pivotal summit.
Ahead of his comments, equities had tumbled more than 1.0 percent in London, Frankfurt and Paris and the euro slid versus the dollar.
But London's benchmark FTSE 100 index fought back to show a loss of only 0.58 percent at 5,418.76 points in late morning deals. Frankfurt's DAX 30 lost 0.53 percent to 5,881.79 points and in Paris the CAC 40 retreated 0.79 percent to 3,132.25 points.
The European single currency rose to $1.3825 from $1.3754 late in New York on Wednesday. The dollar was flat at 76.81 yen, while gold prices dropped to $1,620.68 an ounce from $1,652.50 Wednesday.
As France and Germany struggled to reach common ground on ways of stemming contagion from the eurozone debt crisis, Barroso said there would be a "positive" result if all maintained "a sense of compromise."
Speaking at a Brussels conference, Barroso said it was vital to reach agreement on strengthening Europe's rescue fund, the European Financial Stability Facility (EFSF), the bloc's primary weapon to stem the crisis.
"If there is one aspect to outreach all the others it's the need to reinforce the firewall," he said.
Three days of talks on the crisis will be held in Brussels from Friday, first gathering the 17 eurozone finance ministers, followed by finance ministers and foreign ministers from the 27-nation bloc.
The talks culminate with the summit Sunday, due to produce a new roadmap to overcome the crisis amid heightened fears that eurozone troubles will contaminate the global economy.
Analysts said uncertainty heading into the summit was creating volatility on markets.
"Unrealistic expectations regarding a wonder solution to the debt problems, which is a complicated issue, are what has led to increased volatility as investors over-responded to every political piece of news," said Anita Paluch, a trader at Gekko Global Markets.
"It is quite unlikely that the weekend meeting will bring complex systemic solution involving commitments from many parties, therefore another disappointment may follow if the markets are poising for another announcement of a 'quick fix'
Speculation that France and Germany had agreed to more than quadruple the European Financial Stability Facility sent shares higher on Wednesday.
But by the end of the day doubts set in as reports emerged that the EFSF was still being discussed.
In Asian on Thursday, Tokyo closed down 1.03 percent, Seoul shed 2.74 percent and Sydney fell 1.63 percent.
"Generally markets are still pretty nervous about Europe," said CBA Institutional Equities head of sales Justin Rooney.
Adding to downside pressure on markets was the US Federal Reserve's "Beige Book" September report on the world's biggest economy, which said while there was still growth in all areas, "many districts described the pace of growth as 'modest' or 'slight'."
Wall Street reacted by closing in the red on Wednesday. The Dow lost 0.63 percent, the S&P 500 shed 1.26 percent and the tech-heavy Nasdaq dived 2.01 percent.
"The prospect of the eurozone debt and banking crisis quickly deteriorating increases the risk of global recession," said Neil MacKinnon, an economist at VTB Capital financial group.
"Equity markets, which have rallied in recent weeks on hopes that policymakers would resolve the crisis, are now vulnerable to significant downside corrections," he added on Thursday.