European stocks stage light rebound after heavy losses

European stock markets rebounded slightly on Wednesday after the previous day's deep losses that were sparked by fresh fears over the eurozone debt crisis, centred on Spain, and the weak global economy.

Investors were watching Spain and Italy closely as their borrowing costs have risen sharply in recent days to uncomfortably high levels, putting even more pressure on their governments.

In morning deals, London's benchmark FTSE 100 index added 0.09 percent to 5,600.64 points, Frankfurt's DAX 30 rose 0.83 percent to 6,660.54 and in Paris the CAC 40 firmed 0.54 percent to 3,234.93 points.

Milan's FTSE Mib index -- which slumped nearly 5.0 percent on Tuesday -- rallied 1.11 percent to 14,626.97 points and Madrid's Ibex 35 gained 1.21 percent to 7,523.80.

In foreign exchange trade, the European single currency rose to $1.3123 from $1.3080 late in New York on Tuesday.

"Eurozone concerns are back in the picture as the focus falls on the Spanish situation and whether it will be the next eurozone country to be bailed out," said trader Andrew Crook at Sucden Financial Private Clients.

"The Spanish government is having to walk the tightrope of convincing the population of the severity of the situation and the need for austerity, whilst at the same time trying to avoid spooking the markets and creating panic."

Madrid's 10-year bond yields were close to 5.9 percent, having spiked to the key 6.0-percent level in early trade, flirting with rates which many consider unsustainable for the long term as the country struggles to stabilise its public finances and get its economy back on track.

Italian bond yields -- the return earned by investors -- were about 5.6 percent but Rome had to pay much higher rates Wednesday when it raised 11 billion euros as investors turned distinctly cautious on the outlook.

Investors are extremely worried over the plight of Rome and Madrid because their bond yields are approaching levels that sparked the enormous EU-IMF bailouts for Greece, Ireland and Portugal.

"If Spanish bonds continue to rise we will soon see them reach the level that Greece, Ireland and Portugal needed bailout packages to come back from," said broker Jonathan Bristow at Valbury Capital.

"Today, the Spanish prime minister will address parliament to explain the heaviest budget cuts in over 30 years."

Global stock markets plunged on Tuesday as the eurozone crisis returned with a vengeance, with Spanish bond yields jumping as doubts grew over the debt-laden country's ability to control its finances.

Investors have become worried that the severity of Madrid's austerity measures could deepen the country's economic downturn, in turn hitting the country's ability to repay its debts.

"The Spanish government appears to be losing its battle to restore credibility on the budget front," noted Rabobank analyst Jane Foley.

She added: "Spain is under heavy pressure to prove that it is committed to reduce its budget deficit to its 3.0-percent target next year. Both the government and the markets are well aware that austerity will increase the burden of recession."

Equities across Europe also tumbled on mounting fears over global growth prospects following weak Chinese trade and US jobs data.

On Tuesday, London stocks plunged 2.24 percent, as investors returned from their Easter holiday weekend on the first trading day for Europe's leading market since last Thursday.

However, losses were deeper elsewhere. Frankfurt shed 2.49 percent and Paris sank 3.08 percent, while Milan slumped 4.98 percent and Madrid dived 2.96 percent.

Asian markets mostly fell further on Wednesday following heavy losses elsewhere, on the back of intensifying concerns that the eurozone crisis could derail the global economic recovery.

Tokyo slid 0.83 percent, logging its seventh straight loss, Sydney fell 1.07 percent and Hong Kong dropped 1.06 percent but Shanghai finished 0.13 percent higher.

Wall Street sank on Tuesday for the fifth straight drop as worries about upcoming earnings, slower growth and the possibility of a Spain-driven return to crisis in Europe, kept a cloud over trade.

New York's Dow Jones Industrial Average closed down 1.65 percent at 12,715.93 points.

Global economic fears are mounting after US jobs growth in March came in below forecasts and much lower than previous months, while China has released a string of data pointing to a slowdown.

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