LONDON: European stocks rebounded slightly and the euro staged a modest recovery against the dollar on Thursday as France pressured Germany to back eurobonds and a new role for the European Central Bank to choke off the debt crisis.
Asian shares closed mixed as fears about Europe's debt crisis deepened after Germany, considered the pillar of the eurozone, failed on Wednesday to sell all of the bonds on offer in an auction. US markets were shut for Thanksgiving.
In morning deals, London's FTSE 100 index rose 0.38 percent to 5,160.19 points, Frankfurt's DAX 30 climbed 1.29 percent to 5,532.43 points and in Paris the CAC 40 gained 1.35 percent to 2,860.98.
European stocks slumped on Wednesday, with London losing 1.29 percent after a sale of German 10-year bonds flopped.
The euro climbed to $1.3385 on Thursday from $1.3334 on Wednesday, when the single currency had also hit a six-week low point of $1.3327.
"Contagion is slowly dragging some of the most secure countries into the debt crisis," said Jonathan Bristow, a broker at Valbury Capital.
"If the eurozone leaders don't turn it around soon this global crisis will take hold on the very countries needed to get us out of it."
The European Union on Wednesday demanded sweeping powers to override national budgets and proposed issuing joint eurozone bonds to help resolve and prevent a repeat of the debt crisis. Germany opposes the eurobonds idea.
France, which backs the measure, pressured Germany on Thursday to reconsider its firm refusal to allow the European Central Bank to become the lender of last resort to the eurozone's debt-wracked member states.
President Nicolas Sarkozy was to host German Chancellor Angela Merkel and Italian Prime Minister Mario Monti in the eastern city of Strasbourg, as the 17-nation bloc struggles to reassure nervous bond markets.
Ahead of their arrival, Foreign Minister Alain Juppe repeated France's call for the ECB to play an "essential role" in resolving the crisis, which has threatened to bankrupt governments and endangers the single currency.
"It is urgent," he told France Inter radio. "The situation is serious. We must not underestimate its gravity. It touches even the most solid economies."
A German government bond auction Wednesday drew some of the weakest demand since the introduction of the euro, signalling diminishing investor appetite even for the safest eurozone assets.
German bonds are considered the gold standard of eurozone debt.
Berlin managed to draw bids of only 3.9 billion euros for its six-billion-euro 10-year bond auction, indicating that investors are now sceptical about even the safest assets in the eurozone.
The failure comes days after Moody's warned that France's weak growth and exposure to European debt could see it lose its cherished AAA debt rating, which would send its borrowing costs soaring.
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