European equities edged higher in morning trade on Tuesday, supported by stronger mining shares, but persistent worries about fiscal problems in Greece, Spain and Portugal forced investors to stay cautious.
At 0923 GMT, the FTSEurofirst 300 index of top European shares was up 0.4 percent at 983.21 points after falling to a low of 974.13 earlier in the session.
The index, which gained 0.7 percent on Monday, has fallen around 9 percent since hitting a 15-month high last month, but is still up 50 percent from a record low in March 2009.
European Central Bank President Jean-Claude Trichet is cutting short a trip to Australia to attend a special EU summit, prompting market speculation initiatives are in the works to help resolve Greece's debt problems.
EU heads of state are due to meet on Thursday in Brussels for a special summit on the economy under pressure to restore confidence among investors worried that rising debt in Greece, Portugal and other weaker states in the euro zone could undermine a global recovery.
Miners got strength from higher metals prices, with copper rising 1 percent, aluminium up 0.7 percent and zinc gaining 1 percent.
BHP Billiton, Anglo American, Antofagasta, Rio Tinto, Xstrata and ENRC rose 1.7 to 2.9 percent.
But energy shares featured among the top losers, with Royal Dutch Shell, Tullow Oil, Repsol, Total and StatoilHydro falling 0.1 to 0.8 percent.
Analysts said the market was expected to remain volatile in coming sessions. The FTSEurofitst 300 is down 6 percent so far this year after jumping 26 percent in 2009.
"Investors are rightly concerned about the timing of the removal of extraordinarily loose fiscal and monetary policy. The risk of default has increased and there is an uncertainty over financial regulation," said Henk Potts, equity strategist at Barclays Wealth.
"The credibility has been lost in terms of market participants' belief in authorities to deal with many of these problems. And that's creating the nervousness and has been unsettling markets," he said, referring to fiscal problems in countries such as Greece.
FINANCIALS ADVANCE
Banking shares, which fell 6.4 percent last week, were broadly in demand. Barclays, Lloyds, Royal Bank of Scotland, BNP Paribas, Societe Generale, Credit Agricole and Credit Suisse rose 1.3 to 3.2 percent.
Banking group Swedbank was up 1.3 percent after posting a fourth-quarter operating loss that was bigger than market expectations, but said a profit for the full year in 2010 was "feasible".
But UBS shares fell 0.4 percent. The Swiss bank posted its first quarterly net profit since Oswald Gruebel took the helm a year ago, but client withdrawals rose well above forecasts.
Swatch Group, the world's largest watchmaker by sales, rose 5.6 percent after posting forecast-beating full-year profit and confirmed its upbeat outlook for 2010, easing worries a flagging economic recovery may hit demand.
Heidelberg, the world's largest printing press maker, rose 2.6 percent after posting a rare forecast-beating quarter thanks to cost cuts and warned a turnaround in the print industry remained elusive.
In macroeconomic news, British retail sales recorded their worst performance for the month of January in at least 15 years, even as separate figures showed house prices extended their recent rise. Across Europe, Britain's FTSE 100 index, Germany's DAX and France's CAC 40 were 0.3 to 0.7 percent higher.
