Europe Stocks Recover Despite New Asia Plunge

European stock markets including the FTSE 100 (NasdaqGS: Z - news) have rallied following days of losses as investors moved to snap up bargains and reacted to some more positive news for banks.

It was a nervous opening after Japan's Nikkei fell 2.3% by the close on Wednesday - on top of a 5.4% decline during the previous session - but the FTSE was more than 1% higher by mid-morning.

Some of the gains faded later but London's leading share index still closed 40 points, or 0.7%, ahead.

The progress was dented after investors failed to see signs of a pullback in the US Federal Reserve's predicted path for interest rate rises when its chair, Janet Yellen, told a Congressional committee in a statement that US economic conditions currently allow the Fed to pursue "gradual" adjustments.

Gains were stronger on the continent after eurozone bank stocks, which have taken a hammering on capital shortfall concerns, recovered some ground.

Italy's MIB rose 5% while Deutsche Bank (Other OTC: DBAGF - news) stock climbed 10% to recover some of its steep losses earlier this week, amid unconfirmed reports of a plan to raise funds.

Later, Wall Street initially climbed too but the S&P 500 Index ended flat after a mixed reaction to congressional testimony from US Federal Reserve chair Janet Yellen as she warned of the risks facing the US economy.

The damage inflicted on the Nikkei's value has been particularly hard in recent days as investors have run to the relative safety of the yen, strengthening its value against the dollar at a time of negative central bank interest rates to help back its value back.

The currency's leap has placed its export-facing companies in the stock market firing line.

The assault worldwide on commodity and energy stocks is nothing new given the slowdown in the world economy and record oil glut holding down prices - currently at $31 a barrel.

However, the pressure on banks - in the eurozone in particular - is a more recent phenomenon and investors have made a stampede for the exit this year over fears of possible capital shortfalls and exposure to loans in the struggling mining sector.

The main worry is that low interest rates coupled with the weak economic environment will hold back profits for years to come.

The mining-heavy FTSE 100, which is almost 9% down in 2016 so far, has also seen its bank shares come under pressure with Barclays (LSE: BARC.L - news) and RBS losing around a quarter of their respective values.

It has been worse for many of their counterparts in Italy and Greece while Deutsche - Germany's biggest lender by assets - was forced to issue a statement on Tuesday insisting its balance sheet was "rock solid".

It has not commented on talk of a capital-raising exercise.

Other bank shares were among the stocks to recover some ground in Europe on Wednesday.