Stock markets were mixed in choppy trade with Spain's borrowing costs rising to a euro-era record following a ratings downgrade tempered by a bout of optimism about Greek elections.
European stocks moved lower following losses in Asia on Thursday, but several staged late rallies to close in positive territory, including in Athens, which jumped more than 10 per cent on hopes voters will elect a coalition on Sunday that will keep it in the euro.
London's benchmark FTSE 100 index dropped 0.31 per cent to 5,467.05 points and in Frankfurt the DAX 30 shed 0.23 per cent to 6,138.61 points, but in Paris the CAC 40 bucked the trend to add 0.08 per cent to 3,032.45 points.
Milan jumped 1.47 per cent and Madrid gained 1.22 per cent despite the turmoil in the bonds markets.
Meanwhile Greek shares soared more than 10 per cent on speculation that voters will elect a government committed the austerity policies key to it receiving further bailout aid and staying in the euro.
In foreign exchange deals, the euro rose to $US1.2612 from $US1.2556 late on Wednesday in New York.
Spain's borrowing costs reached new dangerous highs near seven per cent as a bailout loan of up to 100 billion euros ($A127 billion) to salvage the nation's stricken banks fell flat after a brief initial positive welcome.
"The rout in Spanish bonds continues relentlessly, as Madrid's borrowing costs move ever higher and ever closer to the dangerous seven percent level," said Chris Beauchamp, a market analyst at trading group IG Index.
The interest rate on Spanish 10-year government bonds soared to just under seven per cent to their highest since the birth of the single currency and were up sharply from 6.721 per cent on Wednesday.
Neil MacKinnon, an economist at financial group VTB Capital, said that a level of seven per cent was "considered by the markets to be a tipping point which eventually increases the prospect of a government bailout".
Italy also had to pay investors much higher rates of return on Thursday, when it raised medium- and longer-term financing.
Such high rates are regarded by many analysts as impossible for Spain to afford to finance its activities over the longer term, raising the risk of a bigger bailout, as was the case for Greece, Ireland and Portugal.
In Asian trade, stock markets closed mostly down as dealers followed losses on Wall Street while selling pressure was also stoked by fears over Spain and nervousness ahead of the Greek polls at the weekend, traders said.
Tokyo dropped 0.22 per cent, Sydney shed 0.53 per cent and Hong Kong lost 1.15 per cent.
In midday trade, the Dow Jones Industrial Average was up 0.85 per cent to 12,603.09 points.
The S&P 500-stock index advanced 0.78 per cent to 1,325.08 points, while the tech-heavy Nasdaq Composite climbed 0.61 per cent to 2,820.63.
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