US stocks have risen, recovering some ground from Tuesday's falls thanks to strong results from Disney and upbeat US productivity data.
Wall Street shares fell after comments from a Federal Reserve official suggested that US interest rates would not be cut further.
By midday, the Dow Jones index was up 74 points, or 0.6%, to 12,339.2, while the Nasdaq added 0.7%.
Traders have been betting that the Fed, the US central bank, would further reduce rates from their level of 3% to support the ailing US economy.
Data showing contraction in the service sector saw the Dow fall 3% on Tuesday.
The benchmark Dow Jones shed 0.5%, to 12,200.1, while the Nasdaq lost 1.3%.
In Europe, traders were cautious ahead of a UK and eurozone interest rate decision on Thursday. Earlier, the UK's FTSE 100 rose 7.4 points at 5,875.4.
Comments by Fed rate-setter Charles Plosser and a dismal earnings report from Macy's erased earlier gains.
Analysts said Disney's latest figures and a stronger-than-expected rise in US worker productivity overshadowed continuing recession fears.
US stock indexes had begun the session on a brighter note thanks to strong results from entertainment giant Walt Disney and upbeat US productivity data.
'Natural inclination'
But recession fears that had sent the Dow down 3% on Tuesday came back after Mr Plosser warned that the Federal Reserve may not be able to cut rates further as a result of inflation risks.
"It's probably the natural inclination of markets to try to bounce after a bad day," said Peter Boockvar, equity strategist at Miller Tabak in New York.
In Europe, traders were cautious ahead of a UK and eurozone interest rate decision on Thursday.
We're kind of treading water right now. The market's very jittery and nervous Jim Herrick, director of equity trading at Baird & Co
Earlier, the UK's FTSE 100 rose 7.4 points to 5,875.4.
"There's no question that Disney helped and productivity numbers coming in better than expected didn't hurt either."
The latest results from media group Time Warner also pleased investors.
While it reported a fall in profits for the last three months of 2007, it said it expected profit growth in 2008 to possibly exceed Wall Street estimates.
Yet despite the share rises, analysts cautioned that stock market turbulence was likely to return.
"We're kind of treading water right now," said Jim Herrick, director of equity trading at Baird & Co.
"The market's very jittery and nervous."
After a volatile session, Frankfurt's key Dax climbed 1.2% to end at 6,847.5, while the Paris-based Cac 40 had added 0.8% to finish at 4,816.
Asian shares had tumbled earlier, taking their queue from Wall Street's troubles on Tuesday.
Japan's main Nikkei 225 index had earlier finished 4.7% lower, while Hong Kong's Hang Seng lost 5.4%.
