Europe gains as banks recover, Wall Street set for higher open

European stocks rebounded Thursday as banks recouped some hefty losses despite ongoing concerns over their exposure to the debt of countries like Greece and Italy, while Wall Street was poised for a rebound following another rout.

That reverse on Wall Street on Wednesday prompted a retreat in most Asian markets earlier.

The wild swings on a daily basis and across timezones highlights how febrile markets are at the moment amid concerns over the global economy and the levels of debt in both the U.S. and Europe.

In Europe, Britain’s FTSE 100 rose two per cent to 5,108, while Germany’s DAX was 2.5 per cent higher at 5,754. The CAC-40 in Paris also gained 2.5 per cent to 3,078.

Wall Street, meanwhile, was set for a higher open, with Dow futures pointing up 1.5 per cent at 10,880 points, while the broader S&P 500 futures gained 1.7 per cent to 1,142.

The recovery on European markets was led by banks, which saw their share prices pummeled Wednesday.

Societe Generale was up over seven per cent, after its CEO asked the French market regulator to investigate rumours about the bank’s finances that triggered a 15 per cent sell-off in its shares Wednesday. SocGen’s French peer BNP Paribas rose 2.2 per cent, while Deutsche Bank gained 1.9 per cent.

Thursday’s gains came after Wednesday’s hammering of stocks in Europe and the U.S. Any investor cheer to the news that the Federal Reserve was keeping its super-low interest rates until the middle of 2013 dissipated as they interpreted that stance to mean that the U.S. economy will not improve substantially by 2013.

Worries over Europe’s debt crisis spreading have also not been calmed by a more active role in the bond markets from the European Central Bank.

Though stock markets are swinging wildly, there’s been a measure of calm in the bond markets of Spain and Italy in the wake of the ECB’s purchase of their bonds. The yield, or interest rate, on Spanish and Italian 10-year bonds remained stable at around 5 per cent. That rate is considered manageable for now and is over a percentage point lower than where they were trading a week ago.

However, analysts think that they will have to get even lower to really dampen worries that Europe’s debt crisis will ensnare the eurozone’s third and fourth largest economies.

Earlier, Asian markets were under pressure following Wednesday’s big reverse on Wall Street.

Hong Kong’s Hang Seng index fell 1 per cent to 19,595.10, but China’s main index in Shanghai rose 1.3 per cent to 2,703.90.

Japan’s Nikkei 225 index slipped 0.6 per cent to close at 8,981.94 as a strengthening yen, clobbered Japan’s crucial export sector. Honda Motor Corp. and Nissan Motor Corp. each lost 3.5 per cent.

By early morning London time, the dollar was 0.4 per cent lower at 76.50 yen, not far above the level last week that prompted the Bank of Japan to intervene in the markets.

Meanwhile, the euro was up 0.8 per cent at $1.4253 in an environment of higher risk appetite.

In the oil markets, prices recovered alongside equities. The main New York rate was up 88 cents at $83.77 a barrel.