European stocks recover quickly in low volumes as Spain bond auction eyed

European stocks pushed tentatively higher in early trading – though in thin volumes – helping to regain ground lost in yesterday’s weaker session, however, gains remain open to reversal depending on the success of a long-term Spanish debt auction later this morning.

The FTSE 100 gained 41 points or 0.72% in the first hour of trading, with similarly strong gains seen in French and German stocks too.

In the morning session the focus of most investors in Europe remains the results of the two-year and 10-year Spanish debt auction. Spain is aiming to raise €2.5bn of debt maturing in 2014 and 2022. Whilst the short-term bill auctions for Spain progressed well earlier in the week. It is the markets appetite for holding longer term Spanish debt that will be the real test of confidence in Spanish fiscal policies and attempts to reign in its deficit.

Whilst the sums we are talking about are nothing too dramatic, the results are likely to be seen as a reference for market confidence in the eurozone crisis and risk appetite as a whole. Benchmark 10-year Spanish bond yields fell four basis points in early trading.

That said, European and US company earnings continue to provide a somewhat welcome blindside to the situation in Spain. Out the US later we see Bank of America Corp, Morgan Stanley, Microsoft and Verizon all report their respective quarterly earnings and they are likely to influence the share prices of UK listed stocks within similar sectors.

In the UK, we have seen Debenhams, Hammerson and SABMiller all report updates to the market. Debenhams shares price rose 1.9% in early trading after the retailer beat market expectations to report a pre-tax profit of £128.5m, which was just below the same results a year ago but ahead of consensus forecasts of £124.5m.

Hammerson shares traded largely flat to small negative after an interim management update said occupancy remains ahead of their 97% target despite challenging conditions and pressure on household incomes. SABMiller shares gained ground after reporting a 3% rise in underlying beer volumes in the first three months of the year with emerging market growth helping to contain continued declines in both Europe and America.

Later in the session a raft of US economic data will be watched intensely in the shape of weekly Jobless Claims (1.30pm GMT), Existing Home Sales (3pm GMT), Philadelphia Fed Survey (3pm GMT), Leading Indicators (3pm GMT) and Fed Balance Sheet (9.30pm GMT).