- European stocks recover on hopes Cyprus chaos containable
- Cypriot leaders reject bailout plan, look for alternative
- Euro up 0.1 pct to $1.29, off 4-month lows
- Fed meeting outcome also in focus
European shares rose after three days of losses on Wednesday with investors optimistic that European policymakers would make sure the crisis in Cyprus did not spread to other countries.
Cypriot leaders were holding talks in Nicosia to avert a financial meltdown after parliament rejected the terms of a European Union bailout while Finance Minister Michael Sarris was trying to secure a last minute loan deal with Russia.
"Basically the negative spill-over effects on Europe are small. I think that ECB will do everything to prevent a contagion," said Christian Stocker, equity strategist at UniCredit in Munich.
The European Central Bank (ECB) has said it was committed to providing liquidity within certain limits, although it has also threatened to end emergency lending assistance for teetering Cypriot banks.
In addition to developments in Cyprus, markets were also waiting for the outcome of the U.S. Federal Reserve's latest policy meeting for any signs of a change in its attitude towards the current aggressive bond buying programme.
The British government will also release its annual budget at 1230 GMT.
The euro traded at around $1.29 to the dollar in European trade up about 0.1 percent after touching a four-month low of $1.2843 on Tuesday.
The pan-European FTSEurofirst 300 index was up 0.4 percent at 1,200.21 points helping lift MSCI's world equity index by 0.1 percent.
German government bond futures, used as a safe-haven in times of market stress, were 12 ticks lower at 144.57, but were not far from the high price levels seen before the Cypriot parliament voted down a bailout deal that had included a radical levy on bank deposits.
Bond markets will be closely watching a German sale of up to 4.0 billion euros of 10-year bonds later to see whether the chaos in Cyprus is causing a major shift in sentiment.
Investors have already begun to back away from bonds issued by the region's other struggling peripheral countries, and upward pressure on Spanish and Italian bond yields was expected to continue throughout the session.
Oil prices joined in the general recovery rising above $108 a barrel and away from a three-month low hit on Tuesday.
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