European stock markets closed higher Tuesday in a sharp technical rebound after heavy losses the previous day as cautious investors carefully watched fresh eurozone debt tensions.
Dealers said a firmer Wall Street helped steady sentiment from mid-afternoon but there was little conviction to take on risk given an uncertain political and economic outlook.
They said the tone was clearly tentative after French presidential polls threw up an unexpectedly strong far-right vote and the Dutch government fell due to differences over adopting more austerity measures.
The markets posted heavy losses Monday after an improvement in Chinese manufacturing data failed to ease nerves, coupled with political developments, and it looked at one stage Tuesday's rebound might run out of steam as fresh worries emerged over struggling eurozone members Spain and Italy.
Italy, and Spain in particular, had to pay sharply higher borrowing rates at short-term debt sales, reflecting concerns that current unpopular austerity measures may not be enough to stabilise their public finances.
In London, the benchmark FTSE 100 index of top companies closed up 0.78 percent at 5,709.49 points. In Frankfurt, the DAX 30 gained 1.03 percent to 6,590.41 points and in Paris the CAC 40 jumped 2.29 percent to 3,169.32 points.
Madrid rose 2.24 percent even as Spain's borrowing costs nearly doubled on three- and six-month treasury bills after the central bank said the country was back in recession. Milan finished with a gain of 2.48 percent.
In foreign exchange trade, the euro firmed to $1.3207 from $1.3159 in New York late Monday.
On Wall Street, stocks opened modestly higher, supported by results from some of the blue-chip companies, with the Dow Jones Industrial Average up 0.89 percent at around 1550 GMT. The tech-laden Nasdaq edged ahead 0.09 percent.
"US earnings reports ... are helping boost individual stocks as well as the broader indices," said Dick Green at Briefing.com, adding: "The tone remains cautious with an eye towards Europe."
Mike Mason of Sucden Financial Private Clients said the US lead, after positive housing figures, was enough to offset eurozone worries for the moment.
"Investor sentiment remains lethargic and although volume has been reasonable this can't be interpreted as a sign of confidence," he added.
The resignation of Dutch Prime Minister Mark Rutte Monday raised fears that the Netherlands' gold plated triple-A credit rating could be in danger.
It is one of only four eurozone countries to still retain the AAA status among the three main credit rating agencies.
Monday's "sharp sell-off in equity markets across Europe has seen uncertainty once more again return to the forefront of investors thoughts as political factors in Europe once again make for an uncertain outlook," said Michael Hewson, senior analyst at trading group CMC Markets.
"The collapse of the Dutch government over austerity budget disagreements has stoked fears that one of the few remaining European triple 'A' countries could not only lose its prized rating but also see any future co-ordinated response (to the debt crisis) undermined by local political difficulties."
Compounding eurozone worries was data on Monday that showed private sector activity across the 17-nation bloc sank at the fastest rate in five months in April, indicating that it faces a longer recession than previously thought.
In Asian trade earlier Tuesday, Tokyo fell 0.78 percent, Hong Kong added 0.26 percent, Shanghai was flat and Sydney edged up 0.18 percent.