European markets advanced amid thin holiday season trading volumes on Tuesday, as encouraging signs from Europe's largest economy gave some relief from overhanging fears of the eurozone's troubles.
German business confidence rose unexpectedly in December, while German consumers were resilient in the face of rising economic risks and the ongoing debt crisis.
"The main support factor here continues to be the robust labor market coupled with a solid upward trend in effective wages," UniCredit Research economist Alexander Koch said in a note to clients Tuesday.
GfK, the German research institute that carried out the consumer confidence study, warned that while economic expectations are "defying the rising fears of recession," that might change as the debt crisis becomes an increasing problem for Germany's exports.
Spain's weekly auction of short-term debt was also encouraging for investors. Borrowing costs for 3- and 6-month notes fell sharply amid strong demand, indicating market confidence in the country's ability to handle its debt is recovering.
The reassuring macroeconomic news reinforced improving market sentiment as the leadership succession in North Korea appeared to be under control.
North Korean state media have given clear indications that Kim Jong Un will succeed his father, late dictator Kim Jong Il, who died of a massive heart attack on Saturday caused by overwork and stress, according to the North's media.
Since Kim's death they have stepped up their lavish praise of the son, indicating an effort to strengthen a cult of personality around him similar to that of his father and _ much more strongly _ of his grandfather Kim Il Sung.
The possibility of a power struggle in a country pursuing nuclear weapons and known for its secrecy and unpredictability have heightened tensions in the region and unsettled markets on Monday.
But at midday Tuesday, Germany's DAX rose 1 percent to 5,723 while France's CAC 40 index gained 1 percent to 3,005. The FTSE 100 index of leading British companies was steady at 5,362.50.
Makets shrugged off news after trading closed Monday that European Union finance ministers raised only three-quarters of the euro200 billion ($261 billion) that they wanted to provide the International Monetary Fund to help heavily indebted nations avoid default.
Countries that use the euro are hoping the extra IMF loans _ meant to be channeled into a special fund that will invest alongside Europe's own bailout fund _ will encourage non-European countries to provide support for Europe via the IMF.
The failure to come up with the full amount that had been indicated at a summit of EU leaders just 10 days ago signals further rifts within the 27-country EU. At the summit, the 17 eurozone countries also agreed to set up a new treaty to create tighter fiscal rules for the currency union, which has been rocked by a debt crisis for the past two years.
Wall Street was poised to open higher. Dow futures were up 0.8 percent at 11,797 while the broader S&P 500 futures were up 1 percent at 1,210.80.
In Asia, South Korea's Kospi led regional gains, rising 0.9 percent to close at 1,793.06 a day after tumbling 3.4 percent on news of Kim's death.
In currencies, the euro strengthened to $1.3080 from $1.3017 late Monday in New York. The dollar was stable against the Japanese yen.
Benchmark oil for January delivery was up $1.28 at $95.16 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 35 cents to settle at $93.88 per barrel on Monday.
Kelvin Chan in Hong Kong and Fu Ting in Shanghai contributed to this story.