Europe's shares posted modest gains on Wednesday, clawing back some of the steep losses seen in the previous session, boosted by beaten-down miners and banking stocks.
The FTSEurofirst 300 index was up 2.64 points, or 0.3 percent, at 1,028.79 by 0900 GMT, having slid 2.5 percent on Tuesday to its lowest close since mid-January.
Market sentiment suffered a sharp blow on Tuesday when Spain's funding problems returned to the fore, adding to jitters about the global economy in the aftermath of Friday's disappointing employment report.
The mood was also darkened by fears that China's economy could be heading towards a hard landing following robust Chinese inflation figures.
Some strategists took the view that in the context of the recent weakness, with the FTSEurofirst 300 down around 7 percent since hitting an eight-month high in March, and up just 2.8 percent this year, investors might be lured back into the market.
"We still believe there's an opportunity for investors to take advantage of any further weakness that we see to buy in at a cheaper level to increase exposure to harness the medium to long term outperformance that we expect from equities," Henk Potts, equity strategist at Barclays Wealth, said.
The STOXX 50 was up 15.27 points, or 0.7 percent at 2,336.80, and according to its relative strength index, Europe's top blue-chip shares are trading just within oversold territory, potentially providing short-term support.
Banks, big fallers in the previous session as investors fled riskier assets, found favour as Spanish bond yields eased, having risen near six percent on Tuesday, alleviating some concerns over the country's debt problems.
Italy's Intesa Sanpaulo and Brussels-listed KBC Groep were among the top risers across Europe, up 5.4 percent and 3.8 percent respectively.
Also helping sentiment surrounding the sector, HSBC upgraded its recommendation on European banks to "overweight" from "neutral".
HSBC, in a note, points out that the banking sector is the most out of favour in Europe - sell-side analysts have negative ratings, large international funds are underweight, and prices are below tangible book.
"Our case is that at these valuation levels it will not take much good news at all to spark a reassessment and one possible catalyst is signs that earnings are stabilising, which could well happen over the next quarter of two," the bank said.
Buyers also came in for the miners, aided by better than expected first-quarter numbers overnight from Alcoa, which kicked off the Wall Street earnings season with a surprise first-quarter profit, following a loss in the fourth quarter of 2011.
Swedish medical technology firm Getinge was among the sharpest fallers after saying its first-quarter profit would be between 560-570 million Swedish crowns ($82-84 million), below analysts' expectations. Its shares sank 6.5 percent.
A broker downgrade weighed on Britain's BT Group, off 2.1 percent, with JPMorgan cutting its rating on the telecoms firm to "neutral" from "overweight" on valuation grounds, while also citing concerns over its revenue and dividend outlook.
In 2012, BT's shares have risen 14.5 percent, compared with a 5.2 percent fall for the European telecoms .SXKP sector and 0.4 percent rise for the FTSE 100 .FTSE. The stock has broken through its 20 and 50 day moving average support levels in the last two trading days.