European stocks were up by midday, gaining ground for a second straight session as details of a US stimulus package eased fears over the outlook for the world's top economy.
Energy and mining stocks were among the biggest gainers, benefiting from a bounce in commodity prices. Rio Tinto gained 4.7 per cent and BHP Billiton rose 4 per cent, while both BP and Royal Dutch Shell gained 2 per cent.
Nokia, the world's top cellphone maker, rose 4.2 per cent, adding to hefty gains made the previous day after it posted better-than-expected results.
At noon the Dublin market was marginally off at 6808 having earlier risen by over 2 per cent before falling back. The major banking stocks which had all seen their shares rise by over 3 per cent in early trade had eased back by noon and were trading between a range of 1 and 2 per cent up.
Ryanair shares were among the biggest fallers, down over 4 per cent at €3.88.
At 12.02pm, the FTSEurofirst 300 index of top European shares was up 1.4 per cent at 1,349.17 points.
Europe's benchmark index, which on Monday had tumbled nearly 6 per cent in its worst session since the September 11th, 2001 attacks, is still down about 10 per cent so far in 2008, hit by fears that the US economy could tip into recession.
Recently beaten-down banks rose, with the DJ Stoxx bank index up 1 per cent.
Shares in France's Societe Generale, which shocked the markets yesterday as it unveiled a massive trader fraud, rose 1.7 per cent, trimming a small portion of heavy losses suffered over the past few sessions. SocGen's stock is still down 22.5 per cent so far in January.
Other banks were on the rise, such as Credit Suisse up 3 per cent, BBVA up 1.3 per cent, and UniCredit up 0.9 per cent.
"The sell-off of the last few days has brought the equity indices back to very favorable valuations," Gerhard Schwarz, strategist at HVB/UniCredit, in Munich, wrote in a note.
"The P/E of the STOXX 600 is roughly 10.8 times and near its 5-year low, while the dividend yield of the Euro STOXX 50 is currently 4.3 per cent and, therefore, clearly above the 10-year Bund yield.
Initially, this will improve the chances of the equity markets stabilizing." The rise on European markets followed similar gains on Wall Street overnight after government leaders agreed on a plan for tax rebates to stimulate the US economy and shield it from a downturn.
Equity strategists at Goldman Sachs said European shares were now looking far more attractive on valuation grounds, but the risk of further downside persists.