Dealers said figures showing a large fall in US new jobless claims and a pickup in housing starts helped reassure investors who have been spooked by a series of recent data pointing to a marked US economic slowdown.
Similar fears that China, the world's economic powerhouse, and India would cool sharply as their government reined in growth to avoid overheating has added to the negative mix so Thursday's reports were a bit of welcome relief.
In London, the benchmark FTSE 100 index of top shares fell 0.76 percent at 5,698.81 points. In Frankfurt, the DAX slipped 0.07 percent to 7,110.20 points while in Paris the CAC 40 lost 0.38 percent to 3,792.31 points, with most markets recovering a lot of the ground lost earlier in the day.
Dealers said that while the bounce was welcome, it was unlikely to last given the bad news coming out of Athens, where Prime Minister George Papandreou was fighting to save his government and the austerity measures which parliament must pass if Greece is to get the next tranche of funds needed to avoid default.
"The clock is counting down. The financial markets are worried about a disorderly Greek debt default," said VTB Capital economist Neil MacKinnon.
"The risk of a 'Lehman Moment' for the eurozone is increasing," he said, referring to US bank Lehman Brothers, which collapsed in September 2008 and sparked a financial crisis which dragged the world economy into recession.
The EU executive on Thursday urged European decision-makers to put aside differences "at this critical juncture" and agree on a package for a second bailout of Greece by July 11.
Economic Affairs Commissioner Olli Rehn said he was confident the 17 eurozone finance ministers would agree at meetings Sunday and Monday on the disbursement of the latest slice of Greece's 110-billion-euro ($155 billion) bailout loan.
"I call on all EU decision-makers, and more particularly the finance ministers of the euro area next Sunday, to overcome the remaining differences and come to a responsible agreement at this critical juncture," he said.
The International Monetary Fund meanwhile inisted that the disbursement of this tranche was still contingent on Greece pushing through the latest round of austerity measures it had agreed to earlier.
In New York, stocks were firmer in early trade, helped by the economic data even as investors kept a wary eye on events in Greece.
At around 1800 GMT, the blue-chip Dow Jones Industrial Average was up 0.56 percent while the tech-heavy Nasdaq Composite rose 0.24 percent.
In Asian trade earlier Thursday, markets tumbled as they followed sharp overnight losses on Wall Street.
Tokyo slumped 1.70 percent, Hong Kong fell 1.75 percent, Shanghai fell 1.52 percent and Sydney shed 1.91 percent.
Copyright AFP (Agence France-Presse), 2011