European stock markets mostly rose Tuesday and the euro recovered from four-month lows against the dollar as investors assessed the latest developments surrounding the Cyprus bailout saga and digested positive US data.
London's FTSE 100 index of leading companies ended the day with a gain of 0.33 percent to 6,399.37 points.
In Frankfurt, the DAX 30 added 0.11 percent to 7,879.67 points, while in Paris the CAC 40 climbed 0.55 percent to 3,748.64 points.
Madrid lost 1.84 percent as the Spanish central bank forecast that the eurozone's fourth biggest economy will contract even more this year than in 2012, but would then benefit from "a modest rebound in 2014."
The Bank of Spain estimated that economic activity would shrink by 1.5 percent in 2013 and then expand by 0.6 percent in 2014.
In Athens, the Athex composite share price index plunged by 4.9 percent as the third largest Greek bank, Piraeus, said it would take on the Greek subsidiaries of three Cypriot banks.
"Equities have pushed on again during today's session as traders responded to positive macro data from the States and priced in the likelihood of a successful resolution to the Cypriot banking saga," said CMC Markets trader Toby Morris.
Chris Beauchamp, a market analyst at IG trading group, said "calm has finally descended after the turmoil of the Cyprus bailout, but the damage to investor confidence has been done." said
Markets tumbled late on Monday after a top eurozone official was interpreted as suggesting that a levy on bank deposits used as part of the Cyprus bailout could be a template for future rescues in the troubled region.
Jeroen Dijsselbloem, who heads the Eurogroup of finance ministers, said the costs of bank recapitalisations should not fall on the public sector, but on bondholders, shareholders and, if necessary, uninsured deposit holders.
His statement, which came just hours after a last-minute deal to save the Cyprus financial sector, sent the euro tumbling to a four-month low on Monday in late London trading. Markets had initially risen strongly on news of the bailout deal secured overnight Sunday-Monday.
"Eurozone bureaucrats scrambled to backtrack on comments made by Jeroen Dijsselbloem, and it now appears that the Cyprus bailout is a one-off, not to be repeated event," said Beauchamp.
"This is unlikely to reassure nervy depositors, who will be keenly watching for any suggestion that they might have to pay up in any future bailout," he added.
Cash-strapped Cypriots faced fresh hardship on Tuesday as authorities kept banks closed for two more days to avert a run on deposits.
The bailout hits investors with deposits of over 100,000 euros at both Bank of Cyprus and Laiki, and calls for the effective wrapping up of Laiki, with the expected loss of thousands of jobs.
In foreign exchange deals Tuesday, the euro was steady at $1.2852 from $1.2853 in New York late on Monday. The European single currency had hit a four-month low point at $1.2830 after the Dijsselbloem statements on Monday.
Gold prices dipped to $1,598 an ounce from $1,599.25 Monday on the London Bullion Market.
"The euro has remained under downward pressure following the announcement of the financial support package agreement for Cyprus with investors nervous that it could trigger capital flight from the eurozone in the near-term," said Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi.
"The heightened investor uncertainty in the near-term has created more risk-averse trading conditions supporting the yen," he added.
US stocks moved higher after a leading index of housing prices showed a steep price increase.
The Dow Jones Industrial Average rose 0.52 percent to 14,523.50 points in midday trade.
The broad-based S&P 500 jumped 0.47 percent to 1,558.95 points, while the tech-rich Nasdaq Composite Index increased 0.21 percent to 3,242.02 points.
The gains came after S&P/Case-Shiller Home Price index showed average home prices rose 8.1 percent for 20 leading US cities for the 12 months ending in January 2013.
The rise was the highest year-over-year increase since summer 2006, said David Blitzer, chairman of the index committee at S&P Dow Jones Indices.
Asian markets closed mixed Tuesday on the confusion sown about eurozone policy.
Tokyo lost 0.60 percent, Sydney slipped 0.80 percent, and Shanghai fell 1.25 percent.
But Hong Kong gained 0.27 percent, and Seoul climbed 0.30 percent.