European stock markets edged higher on Tuesday, with investors attracted by prices cheapened by a steep month-long sell-off, although concerns about Spain's finances kept the overall mood cautious and volumes low.

By 0743 GMT, the FTSEurofirst 300 index was up 0.4 percent at 1,036.32 points, extending gains into a second day.

The Euro STOXX 50 index of euro zone blue chips added 0.8 percent to 2,319.68 points, bouncing from technical support of 2,300 but still down some 11 percent since mid-March.

"We have a little reprieve," said Justin Haque, pan-European equity salesman at Hobart Capital Markets.

"We are in a technically oversold situation, as simple as that. There is lots of rubbish (news) out there ... it's all pointing to a disaster scenario. The trend is still down."

The Euro STOXX 50 index has held in oversold territory below the 30 mark on the 7-day relative strength index (RSI) for nearly two weeks.

Spain's IBEX slipped to 3-year lows before recovering to trade 0.5 percent higher ahead of a closely-watched auction of treasury bills.

The government's 10-year sovereign bond yields climbed back above 6 percent for the first time this year on Monday and they rose to 6.1 percent in early trade as investors fretted that a recession may scupper deficit targets and eventually necessitate an international bailout.

But on Tuesday a pledge of $60 billion from Japan in loans to the International Monetary Fund went some way to reassure investors that if a bailout is needed, money will be found.

"Spain can be handled to some degree," Gerhard Schwarz, head of equity strategy at Baader Bank, said.

Investors will also scrutinise the German ZEW sentiment indicator at 0900 GMT for signs of any feed through from the troubles in Spain and other Southern European countries. The economic sentiment index is seen edging down to 20.0 in April from March's 1-1/2 year high of 22.3.

"Our risk barometer remains at elevated levels and is unlikely to ease anytime soon, suggesting that a cautious tone towards risk assets remains warranted," strategists at Credit Agricole IB said in a note.

"The recent resurgence of risk aversion following the mixed set of data from China and the U.S., as well as the renewed tensions on the peripherals' bond markets might have altered the confidence of German financial markets professionals ... Risks to our forecasts appear skewed to the downside based on past (over)reaction of the ZEW to negative headlines."