)
Overnight trading in Asia had been mixed despite a rebound on Wall Street, but January purchasing manager index (PMI) data helped settle European nerves before the European Central Bank's monthly meeting on Thursday.
The pan-regional FTSEurofirst 300 was up 0.4% after the data. Outperforming Italy, Spain and Portugal bolstered gains of 0.4, 0.3 and 0.2% in London, Paris and Frankfurt.
Markit's euro zone Composite PMI, which gauges business activity across thousands of companies and is seen as a good guide to economic health, climbed to 52.9 in January from 52.1 the previous month. That was the highest final reading since June 2011.
It showed the recovery of the 18-member bloc is broad-based, Markit said, with Germany leading an upswing in peripheral members amid signs of a stabilisation in number two economy France.
"The euro zone PMI was down slightly on the earlier flash reading but nevertheless signals a very encouraging start to the year," said Chris Williamson, Markit's chief economist.
It was welcome news following data hiccups from the world's biggest economies, the US and China, earlier this week.
Dealers cautioned, however, that the mood remained brittle and it would only take a poor US payrolls report on Friday to set the bears running again. The ADP reading on private hiring is due later on Wednesday, and investors are likely to react badly to any disappointment.
In Asia, the strain clearly took a toll. Demand for safety in the yen and top-rated bonds grew on a roller-coaster day for Toyko's Nikkei and more losses for Chinese stocks.
The Nikkei eventually closed up 1.2%, but swings throughout the day meant it never got close to testing resistance at the 200-day moving average. The index has shed 14% this year following last year's 50% boom.
YEN EFFECT
The faltering performance was all the more disappointing as some major corporate names reported upbeat earnings, helped by the yen's recent plunge. Panasonic Corp jumped 17% after its quarterly earnings more than tripled. Toyota Motor Corp rose 5% after it predicted record annual profits.
On Wall Street, the Dow had ended Tuesday up 0.47% and the S&P 500 added 0.76%. But stock futures were trading lower on Wednesday, with the S&P e-mini contract off 0.3%.
The underwhelming bounce in the Nikkei led investors to again bid up the safe-haven yen, with the dollar dipping to 101.36 yen from an early top of 101.77.
"The key will be the US data, and any missing of forecasts will challenge the global recovery story and push dollar/yen towards the 100.60 support," said Jeremy Stretch, the head of currency strategy at CIBC World Markets.
The euro eased a touch to $1.3510 and German Bund yields returned to six-month lows, still driven by speculation that the threat of deflation might nudge the European Central Bank into easing policy on Thursday.
The major mover in currencies was the Australian dollar, which surged after the country's central bank on Tuesday shut the door on further rate cuts.
The Aussie was enjoying the view at $0.8910 after climbing a steep 2% overnight. It also rallied against the euro and yen as speculators abandoned short positions in what had been a very crowded trade.
TREASURY HUNT
The reluctance to take risks led to demand for US Treasuries, with the 10-year yield ticking down to 2.61%, not far from the recent three-month low at 2.57%.
Gold got a slight boost but remained sluggish at $1,255.60 an ounce.
In commodities, prices for wheat were boosted by dry weather and deteriorating crop conditions in the United States. Soymeal and corn were in high demand.
Broad gains in grains and natural gas lifted the Thomson Reuters/Core Commodity Index 1%, the biggest one-day gain in nearly a month.
US oil futures rose on bets on a reduced stockpile at a key delivery point caused by the start-up of a major pipeline. The March NYMEX contract added 64 cents to $97.84 a barrel. Brent crude rose 42 cents to $106.20.
