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LONDON – Stocks recovered their poise Wednesday as political tensions in the Korean peninsula receded, while the euro briefly fell below $1.33 for the first time in two months amid worries that Europe's debt crisis was spiraling out of control and heading for Portugal and Spain.

With the embattled Irish government poised to present another batch of spending cuts and tax hikes to get a massive financial bailout, a public sector strike in Portugal and worries over Spain's ability to service its debt, the euro was down 0.1 percent at $1.3345. It earlier fell as far as $1.3284, the weakest level since September 22.

European stock markets and Wall Street futures were trading mostly higher, though trading is likely to remain volatile over the rest of the day as traders in the U.S. shut up shop ahead of the Thanksgiving break.

The FTSE 100 index of leading British shares was up 30.09 points, or 0.5 percent, at 5,611.37 while Germany's DAX rose 43.39 points, or 0.7 percent, at 6,748.39. The CAC-40 in France was 7.12 points, or 0.2 percent, higher at 3,731.54.

Wall Street was also poised for a modest bounceback at the open later — Dow futures were up 20 points, or 0.2 percent, at 11,033 while the broader Standard & Poor's 500 futures rose 1.9 points, or 0.2 percent, to 1,180.20.

The main focus in the markets now that tensions in the Korean peninsula have receded somewhat — at least in the eyes of investors — is the growing fear that Europe's debt crisis is a long way from being solved and may actually be getting worse despite an expected bailout of Ireland, following on from Greece's rescue earlier this year.

"The danger is that the financial markets discard fundamentals entirely, move into panic mode and reduce risk in all but the strongest eurozone debt markets," said Derek Halpenny, an analyst at The Bank of Tokyo-Mitsubishi UFJ.

There have been moments over the past couple of days when signs of panic have been spotted, particularly with regard to the euro, which has sunk from Monday's high of $1.3786.

In the bond markets, the prospective Irish bailout has done nothing to alleviate concerns that the next domino to fall will be either Portugal or Spain, partly because of the political chaos that has followed the Irish government's formal request for a financial lifeline.

By early afternoon London time, the rate on Portugal's 10-year bonds was up 0.15 percentage point at 7.01 percent, down a bit from earlier but still a potentially unsustainable level over the longer term. Spanish bonds are also under the spotlight, as they spiked 0.16 percentage point, to 5.06 percent, having earlier gone as high as 5.08 percent.

Portugal was in focus Wednesday as the country's workers took to the street in protest at the government's austerity measures, stoking concerns in the markets that the government will not be able to do much to get a handle on its budget deficit, which has continued to rise in the first ten months of the year.

"Today's strikes suggest Portugal has limited appetite for further austerity," said Rabobank International analyst Jane Foley.

A potentially bigger worry in the markets is Spain.

The consensus among experts is that the European Union, or at least the 16 countries that make up the single currency bloc, can sustain bailing out the small countries like Greece and Ireland and even Portugal.

If Spain is left with no alternative but to tap its partners to pay off its debts, then some believe the euro project itself could be in jeopardy. Spain accounts for around 10 percent of the eurozone economy, in contrast with the other three countries, which account for around 2 percent each.

A number of analysts are blaming German Chancellor Angela Merkel for much of the current turmoil in the markets. Once again, she said Tuesday that the euro faces serious risks from the highly indebted countries.

"Merkel's comments were very unhelpful because they give the impression that she wouldn't mind if the periphery countries fall out of the euro," said Neil MacKinnon, global macro strategist at VTB Capital. "The bond market vigilantes are certainly seeing a turn for the worst in all this and in the short-term are focusing on Spain."

Earlier in Asia, investors had their first real opportunity to respond to the artillery clash between North and South Korea Tuesday, which sent tensions on their divided peninsula soaring. South Korea's financial markets opened sharply lower — 2.4 percent — before quickly paring losses; the Kospi finished the day only 0.2 percent lower at 1,925.98.

Japan's Nikkei 225 stock average fell 0.8 percent to 10,030.11, after briefly falling below the 10,000 mark earlier in the session. Hong Kong's Hang Seng index finished 0.6 percent up to 23,023.86. On the mainland, Chinese shares rebounded in active trading, with the benchmark Shanghai Composite Index gaining 1.1 percent, to 2,859.94.

Benchmark oil for January delivery was up 40 cents to $81.65 a barrel in electronic trading on the New York Mercantile Exchange.

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AP Business Writer Pamela Sampson in Bangkok contributed to this report.

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