LONDON -- Financial markets settled down Thursday after the turmoil of the previous day when concerns over the U.S. fiscal situation combined with renewed worries over the European economy to hammer stocks.
But a vote early Thursday by the Greek Parliament to back another round of austerity measures has helped settle the mood ahead of the monthly press conference from European Central Bank President Mario Draghi. Hopes that U.S. politicians may agree a crucial budget deal have also contributed to the more positive tone in markets.
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"Volatility will likely continue to be the name of the game going forwards as markets lurch from one crisis to the next and investors will continue to trade with extreme caution," said Mike McCudden, head of derivatives at Interactive Investor.
In Europe, the FTSE 100 index of leading British shares was up 0.4 percent at 5,812 while Germany's DAX rose 0.5 percent to 7,269. The CAC-40 in France was 0.4 percent higher at 3,423.
Wall Street was poised for a flat opening, a day after U.S. stocks suffered one of their worst days of the year. Dow futures and the broader S&P 500 futures were up 0.1 percent.
Again, investors in the U.S. will likely be focusing on developments in Washington as politicians return to the nation's capital following the general election.
Top of re-elected President Barack Obama's intray is to fashion a deal with the Republicans who maintained their control of the House of Representatives. Their leader, Speaker John Boehner, said in brief remarks Wednesday that he may be ready to bargain.
An agreement is needed if the U.S. is to avoid the so-called fiscal cliff -- a combination of higher taxes and government spending cuts that automatically take effect unless Congress agrees on a new budget by Jan. 1. Economists warn that a failure to reach a concrete decision will push the world's largest economy back into recession.
Moody's and Fitch have both warned that the U.S.'s triple A credit rating may come under threat if a deal isn't forthcoming. Last year, rival Standard & Poor's stripped the U.S. of its top-tier rating amid the political infighting in Washington.
"The hope is that politicians will be more inclined to be flexible given they don't have to worry about being re-elected for quite some time yet," said Michael Hewson, markets analyst at CMC Markets.
Despite worries over the fiscal cliff, the dollar garnered support on Wednesday through its perceived status as a haven at a time of financial distress. That remained, albeit modestly, Thursday, with the euro trading 0.1 percent lower at $1.2733.
Earlier in Asia, markets tumbled, tracked their counterparts in Europe and the U.S. the day before. Japan's Nikkei 225 index shed 1.5 percent to close at 8,837.15, while Hong Kong's Hang Seng sank 2.4 percent to 21,566.91.
In mainland China, the Shanghai Composite Index lost 1.6 percent to 2,071.51, while the Shenzhen Composite Index lost 2.3 percent to 831.71.
On Thursday, China's weeklong Communist Party congress began -- the once-in-a-decade forum to name China's top leadership. Markets are looking for hints on how the new leadership plans to tackle the nation's economic slowdown.
In the oil markets, benchmark oil for December delivery was up 54 cents to $84.98 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $4.27 amid the turmoil on Wednesday.