European markets climb as expectations 'defy the rising fears of recession': GfK

German business confidence rose unexpectedly in December, while German consumers were resilient in the face of rising economic risks and the ongoing debt crisis.

GfK, the German research institute that carried out the consumer confidence study, warned that while economic expectations are “defying the rising fears of recession,” that might change as the debt crisis becomes an increasing problem for Germany's exports.

Spain's weekly auction of short-term debt was also encouraging for investors. Borrowing costs for 3- and 6-month notes fell sharply amid strong demand, indicating market confidence in the country's ability to handle its debt is recovering.

The reassuring macroeconomic news reinforced improving market sentiment as the leadership succession in North Korea appeared to be under control.

North Korean state media have given clear indications that Kim Jong Un will succeed his father, late dictator Kim Jong Il, who died of a massive heart attack on Saturday caused by overwork and stress, according to the North's media.

Since Kim's death they have stepped up their lavish praise of the son, indicating an effort to strengthen a cult of personality around him similar to that of his father and - much more strongly - of his grandfather Kim Il Sung.

The possibility of a power struggle in a country pursuing nuclear weapons and known for its secrecy and unpredictability have heightened tensions in the region and unsettled markets on Monday.

But at midday Tuesday, Germany's DAX rose 1 percent to 5,723 while France's CAC 40 index gained 1 percent to 3,005. The FTSE 100 index of leading British companies was steady at 5,362.50.

Wall Street was poised to open higher. Dow futures were up 0.8 percent at 11,797 while the broader S&P 500 futures were up 1 percent at 1,210.80.

Asian markets were mixed on Tuesday as initial concerns about regional tensions after the death of Kim Jong Il subsided, although European debt woes continued to drag on sentiment.

With attention turning to the leadership succession in Pyongyang, markets were relieved that there seemed to be no internal turmoil in the nuclear-armed state, providing dealers an opportunity to pick up cheap stocks.

Seoul, which tumbled 3.4 percent on Monday, rebounded on Tuesday to end 0.91 percent higher, adding 16.13 points, to 1,793.06.

Tokyo rose 0.49 percent, or 40.36 points, to 8,336.48 and Hong Kong ended 0.06 percent, or 9.99 points, higher at 18,080.20.

However, Sydney slipped in late trade and ended 0.18 percent, or 7.3 percent, lower at 4,053.1, while Shanghai shed 0.10 percent, or 2.31 points, to 2,215.93.

On oil markets, New York's main contract, light sweet crude for delivery in January, gained US$1.16 cents to US$95.04 a barrel.

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