Markets were boosted again on Tuesday by hopes that the 17 countries that use the euro will finally come up with a plan to deal with their crushing debt crisis, but the surprise announcement that American Airlines and its parent company are filing for bankruptcy protection checked the buying momentum.
As the 17 finance ministers of the eurozone converged on EU headquarters in a desperate bid to save their currency _ and to protect the global economy from a debt-induced financial tsunami _ investors were reminded of the urgency of the task at hand. Italy's borrowing rates in a pair of auctions shot up Tuesday to above 7 percent, an unsustainable level on a par with rates that forced the other nations to seek bailouts.
The fear is that the crisis _ which led to bailouts of Greece, Ireland and Portugal _ could engulf bigger economies such as Italy, the eurozone's third-largest. If Italy were to default on its debt of euro1.9 trillion ($2.5 trillion), the fallout could spell ruin for the euro project itself and send shock waves throughout the global economy.
Though no specific details have yet emerged of what will likely result from a Dec. 9 summit of EU leaders, the ministers are thought to be discussing ideas that would have been taboo only recently: countries ceding fiscal sovereignty to a central authority; some kind of elite group of euro nations that would guarantee one another's loans _ but require strong fiscal discipline from anyone wanting membership.
At a meeting in Brussels on Tuesday, finance ministers also were likely to discuss the options _ plus a possible way to boost the region's rescue fund, the European Financial Stability Facility.
"The relatively benign market mood reflects both some rebound after last week's sharp declines, as well as hopes for progress on the European debt crisis front," said Nick Bennenbroek, an analyst at Wells Fargo Bank.
On Monday, stocks recouped some of last week's losses, particularly in Europe, with the CAC-40 in France up a massive 5 percent. As a result, the gains Tuesday were never expected to match the previous session's, especially after the bankruptcy protection decision by American Airlines, the third-largest U.S. carrier.
In Europe, Germany's DAX closed up 1 percent at 5,799.91, while the CAC-40 rose 0.5 percent at 3,026.76. The FTSE 100 index of leading British shares ended 0.5 percent higher at 5,337.
The euro, meanwhile, was up 0.4 percent at $1.3347.
In the U.S., the Dow Jones industrial average was up 0.7 percent at 11,599, while the broader Standard & Poor's 500 index rose 0.7 percent to 1,200.
Earlier, most Asian markets ended higher, with the Nikkei 225 index in Tokyo climbing 2.3 percent to close at 8,477.82.
Elsewhere in Asia, South Korea's Kospi rose 2.3 percent to 1,856.52 and Hong Kong's Hang Seng added 1.2 percent to 18,256.20. Benchmarks in Singapore, Taiwan and Australia were also higher.
Mainland Chinese shares advanced, with the benchmark Shanghai Composite Index gaining 1.2 percent to 2,412.39.
Oil prices tracked equities modestly higher _ benchmark crude for January delivery was up $1.22 to $99.43 per barrel in electronic trading on the New York Mercantile Exchange.
Pamela Sampson in Bangkok contributed to this report.