Global shares clambered off lows Tuesday after the Italian government promised to speed cost-cutting measures through parliament, reassuring investors who worry the eurozone's third-largest economy could be the next to crumble under unsustainable debt.
Greece, Portugal and Ireland have all required bailouts to stay afloat after investors deemed them poor risks and their borrowing costs consequently soared.
Italy _ along with Spain, the monetary union's fourth-largest economy _ has seemed headed for the same territory in recent days, with the yields, or interest rates, demanded on its bonds steadily rising.
The spread between the yield on Italian 10-year bonds and the benchmark German equivalent hit records on Monday and Tuesday before pulling back. Spain's borrowing costs have also skyrocketed in recent days.
Both countries are substantially indebted, and there have been concerns about their ability to reduce their debt loads for a while. Those worries intensified this week as European finance ministers dithered over the shape and size of Greece's second bailout _ and raised the possibility that it might be allowed to temporarily default. Eurozone bailout funds wouldn't be able to afford to rescue either Italy or Spain.
Rome appeared to step back from the brink Tuesday afternoon, however, when Finance Minister Giulio Tremonti announced plans to accelerate austerity measures. The budget cuts were initially slated to be completed by August, but officials are now saying they'll pass by Sunday.
That reassurance was enough to bring shares off their lows on Tuesday. Milan's main stock market _ at one stage down over 4 percent _ was actually trading 0.5 percent higher by late afternoon.
In Europe, both the French and German indices more than halved their earlier losses. The CAC-40 was down 1.1 percent to 3,768, while the DAX fell 1 percent to 7,157. The FTSE index of leading British shares was down 0.9 percent at 5,874.
In the U.S., shares failed to plunge as had been anticipated earlier by futures markets _ both the Dow Jones industrial average and the broader Standard & Poor's 500 index were unchanged at 12,503 and 1,320 respectively.
Analysts warned, however, that the relief might only be temporary.
"Italy is in danger because of the deadly embrace between Italian banks and Italian debt," said Neil MacKinnon, a strategist at VTB Capital. "The recovery is likely to be short-lived. ... The markets need a proper resolution."
After European markets close, U.S. markets will be assessing the minutes from the last rate-setting meeting of the Federal Reserve to see whether it will undertake more stimulus measures following a run of soft economic data, which culminated in a very weak U.S. jobs report last week.
"Friday's payroll number may have dented sentiment somewhat, but many will be hoping that a positive earnings season will give both the markets and the economy the kick start it needs," said James Hughes, senior market analyst at Alpari UK.
Earlier, Asian shares were undermined on the combination of the renewed concerns over Europe's debt crisis and the stalling U.S. economy.
Hong Kong's Hang Seng slid 3.1 percent to 21,663, while South Korea's Kospi retreated 2.2 percent to 2,110 and the Shanghai Composite Index lost 1.7 percent to 2,755.
Japan's Nikkei 225 stock average shed 1.4 percent to close at 9,926 after Japan's central bank cut its growth estimate for the fiscal year ending March 2012 to 0.4 percent from 0.6 percent. That downgrade is largely a result of the March earthquake and tsunami disasters.
Oil prices also rebounded, though they were still down amid news that the global economy is still struggling.
Benchmark oil for August delivery was down 0.4 percent to $94.78 a barrel in electronic trading on the New York Mercantile Exchange.