Shares recover as Europe fears dull

The euro, which had taken the brunt of the selling and fallen from a high of over US$1.37 at the end of last week to below US$1.35 on Monday, recovered to be up 0.1 percent at US$1.3530.

European shares which have tracked a similar path from closing near two-year highs on Friday to shedding most of the year's gains in Monday's sell-off, also staged a modest advance.

Most analysts see this week's gyrations as a necessary correction to a rally linked to signs of increasing euro zone economic stability and an improving global outlook, underpinned by the easier monetary policies of major central banks.

The markets regained composure on Tuesday after new data confirmed the euro zone's still struggling economy was starting to turn around.

Markit's Eurozone Composite PMI, which gauges business activity across thousands of companies and is seen as good gauge of future growth, rose in January to a 10-month high of 48.6 — though this still means the region's economy is contracting.

But the data also highlighted a growing divergence in the euro zone between the performance of its biggest economy, Germany, and those of other partners, leaving some lingering doubts about the region's prospects.

Markit's composite German PMI chalked up its biggest one-month rise since August 2009, reaching its highest since June 2011. But in neighboring France it fell to its lowest level in nearly four years.

After the data the broad FTSE Eurofirst 300 index of top European shares was up 0.5 percent while London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX were between flat and 0.5 percent higher.

Analysts said the euro and equity market could see further volatility on Thursday when the European Central Bank holds its monthly policy meeting and President Mario Draghi is due to address a news conference.

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