LONDON — Europe's main stock markets rebounded slightly Tuesday on bargain-hunting following a day of sharp losses triggered largely by fears of eurozone debt contagion, dealers said.
London's benchmark FTSE 100 index rose 0.46 percent to 5,691.60 points in late morning deals, Frankfurt's DAX 30 climbed 0.87 percent to 6,579.63 points and in Paris the CAC 40 rallied 1.03 percent to 3,130.24 points.
Madrid gained 1.57 percent, even as Spain's borrowing rate nearly doubled on three- and six-month treasury bills after the central bank said the country was back in recession.
In foreign exchange trade, the euro firmed to $1.3168 from $1.3159 in New York late Monday.
"The markets are beginning to correct themselves ... following a big sell-off of risky assets (Monday) following a French election that could add a new twist to the eurozone saga, the resignation (of the) ... the Dutch government after failing to agree on budget cuts and poor eurozone data," said Craig Erlam, an analyst at Alpari trading group.
European stock markets closed sharply lower Monday, with Paris slumping 2.83 percent and Frankfurt shedding 3.36 percent after a strong far-right showing in French presidential polls and weak Chinese manufacturing data jarred nerves.
Dutch Prime Minister Mark Rutte's government meanwhile resigned on Monday after the collapse of its parliamentary partnership with a far-right party over austerity measures.
The turmoil has raised fears that the Netherlands' gold plated triple-A credit rating could be in danger. It is one of only four eurozone countries to still retain the AAA status among the three main credit rating agencies.
Monday's "sharp sell-off in equity markets across Europe has seen uncertainty once more again return to the forefront of investors thoughts as political factors in Europe once again make for an uncertain outlook," said Michael Hewson, senior analyst at trading group CMC Markets.
"The collapse of the Dutch government over austerity budget disagreements has stoked fears that one of the few remaining European triple 'A' countries could not only lose its prized rating but also see any future co-ordinated response (to the debt crisis) undermined by local political difficulties."
Compounding eurozone worries was data on Monday that showed private sector activity across the 17-nation bloc sank at the fastest rate in five months in April, indicating that it faces a longer recession than previously thought.
Meanwhile a surprisingly strong vote for the National Front, at 18 percent, in first-round French presidential polls muddied the waters after incumbent Nicolas Sarkozy was edged out by Socialist Francois Hollande, 29 to 27 percent.
The prospect remains that Hollande will win the May 6 second round but there is much soul searching over what Sunday's vote may mean for future policy.
In Madrid on Tuesday, Spain's treasury raised 1.933 billion euros ($2.5 billion) but had to pay a steep price -- the borrowing rate nearly doubled to 0.634 percent from 0.381 percent for three-month bills and to 1.580 percent from 0.836 percent for six month bills, compared with the last similar auction on March 27.
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