PARIS – Stock markets rallied Wednesday, recouping some of their losses from a day earlier, when fears grew that the U.S. economy was slowing and Europe's debt crisis returning.
The yield, or interest rate, on Spain's benchmark 10-year bond fell back after pushing 6 percent on Tuesday. Analysts warned, however, that the market recovery was uncertain and that the underlying worries remain.
"Markets have eked out modest gains this morning, but sentiment still feels quite fragile in the wake of yesterday's heavy falls," said Ben Critchley, a sales trader at IG Index. "It seems that the weaker jobs report from the U.S. on Friday is being used as the catalyst for a general sell-off, as concerns about the eurozone combine with worries about a weaker U.S. economy."
After several weeks of respite from Europe's debt crisis, the yields on Spanish and Italian bonds have started climbing again recently, indicating that investors aren't convinced they can reduce their debt loads and so are becoming leery of lending to them.
Rising bond yields are at the heart of the continent's crisis since they reflect how expensive it is for countries to borrow money; high borrowing costs have forced three countries — Greece, Ireland and Portugal — to seek rescue loans when they could no longer afford to fund themselves.
Analysts warn, however, that rising Spanish and Italian yields are not just more of the same.
"The unfortunate reality here is that Spain is very different to those that have already been bailed out; it's arguably too big to bail," said David White, a trader at Spreadex. "And should the provisions made by the Spanish government, the IMF and the ECB not be enough to either reassure the market or help roll over their debt if required, the volatility seen so far this month is likely to continue."
That volatility was on display Wednesday when European shares surged after the three major indexes all lost more than 2 percent on Tuesday.
In France, the CAC-40 rose 0.6 percent to 3,237 while Britain's FTSE gained 0.7 percent to 5,634. Germany's DAX jumped 1 percent at 6,674.
The euro was also climbing, rising 0.3 percent to $1.3116.
Wall Street opened higher, with the Dow gaining 0.9 percent to 12,830 and the S&P 500 0.9 percent 1,371.
Compounding concerns about a faltering recovery in the U.S. are indications that China's growth is also slowing. The country reports its first quarter gross domestic product results on Friday. Beijing lowered its growth target last month to 7.5 percent.
There are fears that high energy prices could also weigh on growth. On Wednesday, benchmark oil for May delivery was up $1.56 cents to $102.57 a barrel in electronic trading on the New York Mercantile Exchange.
Earlier in Asia, Tokyo's Nikkei 225 fell 0.8 percent to close at 9,458.74 after dipping earlier in the day to its lowest level in about two months. Hong Kong's Hang Seng dropped 1.1 percent to 20,140.67 and Seoul's Kospi edged 0.1 percent lower to 1,994.41.
Elaine Kurtenbach contributed to this report from Shanghai.