Weak inflation data spurred hopes the European Central Bank could deliver more stimulus this week, though European bourses traded in a tight range Wednesday, Frankfurt and Paris ceding spartan ground while London rose slightly.
The data appeared to cement hopes that the ECB -- which announces the outcome of its latest monetary policy meeting on Thursday -- will ramp up its quantitative easing (QE) bond-buying programme.
Inflation in the 19-nation eurozone area was unchanged in November at just 0.1 percent, official data showed, dashing expectations of an acceleration to 0.2 percent.
Analysts queued up to stress the influence on the market of the impending ECB decision with the data giving ECB chief Mario Draghi "a little bit more ammunition," according to James Hughes, chief market analyst with GKFX.
For Hughes, a cut in the discount rate or more QE "will see the data take centre stage as investors await something to drive EURUSD (the euro against the dollar) even further lower. The Euro remains under pressure and could well be set to retest the lows for the week at 1.0495 and even push lower."
The European single currency fetched $1.0575 Wednesday at the European close from $1.0634 in late US trade on Tuesday.
Spreadex analyst Connor Campbell said: "The eurozone?s inert inflation appears to give Mario Draghi the green light to increase his quantitative easing scheme tomorrow. Well, investors and analysts seem to think so."
Former IMF deputy director Desmond Lachman of the American Enterprise Institute indicated that "while the ECB will present its action as an appropriate monetary policy response to a weakening Eurozone economic recovery the main channel through which its actions will work will be a further significant depreciation of the euro.
"While this might be good for the European economy, it will impose a substantial burden on the rest of the global economy."
The region's markets had fallen Tuesday as strong economic data gave rise to doubts over the likelihood of eurozone stimulus.
London's FTSE 100 index added 0.6 percent at the close on strong pharmaceuticals but Frankfurt posted a 0.6 percent drop -- troubled Volkswagen (Other OTC: VLKAF - news) being off 1.8 percent after reporting a drop in German sales -- and Paris fell 0.2 percent.
"There can be little doubt that the ECB will press ahead with further stimulus at its December meeting on Thursday," added IHS Global Insight economist Howard Archer.
"Indeed, there are high expectations that the ECB will deliver a pretty aggressive package of measures on Thursday, despite serious reservations among some members of the (ECB) governing council led by the German contingent."
Wall Street dipped although Yahoo (Hanover: YHO.HA - news) shares opened higher on a report that the company could sell its core Internet business.
Shortly after the opening bell, the Dow Jones Industrial Average stood off 0.13 poercent at 17,864.24, while the broad-based S&P 500 and the tech-rich Nasdaq Composite Index were also marginally off.
Yahoo jumped 4.9 percent following a Wall Street Journal report that said the company is considering the sale of its Internet properties in light of uncertainty surrounding the spin-off of its lucrative stake in Chinese e-commerce giant Alibaba.
All three main indexes on Wall Street ended higher Tuesday as investors bet that an increase in interest rates -- expected to be announced by the Federal Reserve this month -- would be slow and gradual.
Earlier, Asian markets faced fresh volatility as weak manufacturing data highlighted weakness in the global economy.
Asian investors got their first chance to react to US data out Tuesday that showed the purchasing managers index for the manufacturing sector contracted for the first time in three years and was its lowest level since June 2009 at 48.6 under pressure from falling energy prices.
- Key figures around 1700 GMT -
London - FTSE 100: UP 0.5 percent at 6,421 points
Frankfurt - DAX 30: DOWN 0.6 percent at 11,194
Paris - CAC 40: UP 0.2 percent at 4,906
EURO STOXX 50: UP 0.25 percent at 3,486
Tokyo - Nikkei 225: DOWN 0.4 percent at 19,938.13 (close)
New York - Dow: DOWN 0.1 percent at 17,869.95
Euro/dollar: DOWN to $1.0575 from $1.0634 in late US trade on Tuesday
Dollar/yen: UP to 123.11 yen from 122.86 yen