European markets up as euro rises from 4-year low

European stock markets rebounded Monday, and the euro pushed back up above near four-year lows against the dollar, despite ongoing worries about the continent's sovereign debt crisis. U.S. stocks were flat after a soft manufacturing survey for the New York region.

In Europe, the FTSE 100 index of leading British shares was up 28.35 points, or 0.5 percent, at 5,291.20, while Germany's DAX rose 32.32 points, or 0.5 percent, to 6,089.03. The CAC-40 in France was 8.43 points, or 0.2 percent, higher at 3,568.79.

In the U.S., the Dow Jones industrial average was up about 3 points at 10,623.11 soon after the open, while the broader Standard & Poor's 500 index rose 1.64 points, or 0.1 percent, at 1,137.32.

Most attention continued to center on the European debt crisis as investors fretted that efforts to cut deficits and debt will kill growth by withdrawing government stimulus from economies in Greece, Spain and Portugal.

Last week's EU-led euro750 billion rescue package may have eased near-term concerns that a eurozone country will default on its debt but has done little to assuage worries that the fiscal stringency being planned will work. In an interview with German newspaper Der Spiegel on Monday, European Central Bank President Jean-Claude Trichet said Europe's economy "is in its most difficult situation since World War II or perhaps even since World War I."

Those worries had weighed on expectations before the open in Europe, but stocks have proved resilient _ for now.

"These pressures are likely to weigh as the week goes on and although stock markets look overdue for some sort of rally, the risk is that any resurgence could be short-lived as investors keep a wary eye on government debt," said David Jones, chief market strategist at IG Index.

The biggest casualty from the eurozone debt crisis has been the euro, which was up 0.2 percent on the day at $1.2373. Earlier it had fallen to a four-year low of $1.2237.

Analysts say that much of the bounce back involves largely technical factors as traders stock buy euros to meet previous trading obligations, but that the currency will continue to be pressured until such a time as the markets think that cogent budgetary actions are in place for all the highly indebted countries.

In a note Monday, Fitch Ratings said investors are deeply skeptical about the ability of governments to get a handle on their huge debt burdens.

"Investors now perceive record government borrowing as the principal risk to market stability and economic recovery," said David Riley, a managing director at Fitch.

Fitch estimates that European governments will need to borrow euro2.2 trillion in 2010 to finance large deficits and roll over existing debt _ up marginally on 2009, which was the largest borrowing requirement for decades.

"While the package of measures announced last weekend will moderate euro area governments' vulnerability to 'confidence shocks' and extreme market volatility, investor confidence will remain fragile until European governments, including the UK, are seen to be delivering on fiscal consolidation and the economic recovery is secured," Riley said.

Though the European debt crisis remains the focal point in the markets, U.S. economic figures still have the potential to move markets. That was clear in the reaction to a weak manufacturing survey: futures markets were anticipating a much stronger opening than emerged.

The under performance on Wall Street came after the Empire State manufacturing index, which gauges activity in and around New York, slid to a four-month low of 19.1 in May from 31.9 the month before.

Paul Ashworth, senior U.S. economist at Capital Economics, said the drop could be the first signal that the rebound in the factory sector is fading and cautioned that the turmoil in Europe could be cutting into orders.

"Disconcerting news but, without corroborating evidence, we would be careful about reading too much into it," said Ashworth.

Earlier in Asia, stocks slid as investors responded to the sharp falls in Europe and the U.S. Friday.

Japan's benchmark Nikkei 225 stock average dropped 226.75 points, or 2.2 percent, to 10,235.76, while South Korea's Kospi lost 2.6 percent to 1,651.51 and Australia's S&P/ASX 200 index was down 3.1 percent at 4,467.20.

Hong Kong's Hang Seng index lost 2.1 percent, while Thailand sank 2.1 percent.

Oil prices oscillated all day in line with changes in share prices. Benchmark crude for June delivery was down 61 cents to $71 a barrel in electronic trading on the New York Mercantile Exchange. The June contract lost $2.79, almost 4 percent, to settle at $71.61 on Friday.

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Associated Press Writer Alex Kennedy in Singapore contributed to this report.