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European stocks retreat as disappointing Italian bond auction renews debt crisis fears
PARIS (AP) ' Fears about Europe's debt crisis ended a rally in Europe on Thursday, pushing most share prices down as Italy's borrowing costs rose in a debt sale.
At an Italian bond auction, the yield, or interest rate, for three-year bonds rose sharply ' an indication that investors are nervous about the country's ability to manage its debt. Spain's yields have also been rising in recent days.
Both countries are struggling to reduce their deficits and debts while also trying to stimulate stagnant growth. Some analysts and investors fear they'll need help from their European peers to keep their borrowing costs in line.
A suggestion from a member of the European Central Bank's board Wednesday that the bank might be willing to buy more Spanish bonds helped ease fears for a bit. Coupled with that, U.S. data indicating the world's largest economy is growing slowly but steadily helped European stocks open up on Thursday.
"The relief (that the ECB might act) could be felt more globally, but it was limited in scope indicating that we remain in a roller coaster and are not at the end of it yet," said Sebastian Galy, an analyst with Societe Generale.
Sure enough, later in the day, the disappointing Italian bond auction put Europe's debt crisis front and center again, and most stocks fell.
France's CAC-40 lost 0.6 percent to 3,220, while the FTSE in Britain moved down 0.2 percent at 5,626. Only Germany's DAX managed to eke out gains, rising 0.2 percent to 6,688.
The euro was largely even, trading 0.1 percent higher to $1.3138.
Stock markets have swung between dives and rallies in recent days as investors try to gauge how strongly the U.S. economy is recovering, how seriously Italy and Spain are struggling and how much China is slowing down.
On Wednesday, a U.S. Federal Reserve survey of business conditions suggested that last month's pullback in hiring may be only temporary. The anecdotal survey found steady growth and stable hiring throughout most of the country.
That may be giving a boost to Wall Street, which looked set to open slightly up. Dow futures rose 0.3 percent to 12,779, while S&P futures were up the same rate at 1,369.
Meanwhile, news reports that Shenzhen, a prosperous exporting region bordering Hong Kong, is planning new measures to boost its economy, helped Asian stocks earlier in the day.
Mainland Chinese shares advanced strongly late in the day, with the benchmark Shanghai Composite Index gaining 1.8 percent to close at 2,350.86. The smaller Shenzhen Composite Index added 1.9 percent to 945.33.
Elsewhere in Asia, Tokyo's Nikkei 225 advanced 0.7 percent to close at 9,524.79. Hong Kong's Hang Seng rose 0.9 percent to 20,327.32.
Seoul's Kospi dropped 0.9 percent to 1,976.14, with investor sentiment damped by North Korea's preparations to launch a long-range rocket in defiance of international warnings.
There remain concerns that high energy prices ' driven in part by unrest in the Middle East ' could weigh on any economic recovery. Benchmark oil continued its climb Thursday, rising 33 cents to $103.03 in electronic trading on the New York Mercantile Exchange. The contract rose by $1.68 to finish at $102.70 on Wednesday.
Kelvin Chan in Hong Kong and Fu Ting in Shanghai contributed to this report.