Europe's stock markets advanced on Wednesday after a late bout of optimism that politicians would act to avoid the looming "fiscal cliff" of automatic tax rises and spending cuts which threatens to send the United States back into recession.

After having spent most of the day in negative territory, optimistic comments by US politicians helped London's FTSE 100 index of leading companies close with a 0.06 percent gain at 5,803.28 points.

In Frankfurt, the DAX 30 added 0.15 percent to 7,343.41 points, while in Paris the CAC 40 rose 0.37 percent to 3,515.19 points.

However Madrid's IBEX 35 slid 0.33 percent to 7,837.60 points after Spain's nationalised Bankia said it would cut 6,000 jobs, about 28 percent of its staff, by 2015.

US stocks also see-sawed on fiscal cliff comments.

In mid-day trade the Dow Jones Industrial Average was up 0.08 percent to 12,888.27 points.

The S&P 500-stock index dipped 0.03 percent to 1,398.50 points, while the Nasdaq Composite slid 0.07 percent at 2,965.85 points.

European equities had risen on Tuesday as investors cautiously welcomed a bailout deal for Greece which eased worries over a bankruptcy for the indebted eurozone country.

Markets then ran out of steam as fiscal cliff worries overshadowed the Greek debt deal and encouraging US economic data.

Investors ran for cover after the Senate Majority Leader Harry Reid said "little progress" had been made in cross-party talks on the looming tax hikes and spending cuts due to come in on January 1.

Reid's comments raised the spectre of another long battle between Republicans and Democrats, similar to last year's row over raising the country's borrowing cap, which led to the United States losing its top-level AAA credit rating.

"The markets passed into the green after the comments by (Republican US House of Representatives Speaker) John Boehner who said he was optimistic on the progress in the talks on the fiscal cliff," said Alexandre Herez, chief investment manager at Convictions Asset Manager.

In foreign exchange deals on Wednesday, the euro slipped to $1.2923 from $1.2938 late in New York on Tuesday, when the European single currency had briefly soared following the Greek deal.

On the London Bullion Market, gold prices dropped to $1,708 an ounce from $1,746.25 Tuesday.

In company activity, shares in Bankia slumped by 9.43 percent to 0.96 euros despite the European Commission approving the restructuring plans of the bank and three other Spanish lenders.

Bankia said it intended to return to profit in 2013, but predicted a huge loss of 19 billion euros this year.

Shares in BP slid 0.43 percent to 429.4 pence after the US Environmental Protection Agency banned the company from US government contracts due to its behaviour in the April 2010 Gulf of Mexico oil disaster.

In Frankfurt, shares in Siemens gained 0.65 percent to 78.94 euros after the German industrial giant Siemens said it will spin off 80.5 percent of its lighting unit Osram with a view to proceeding with the long-planned stock market listing of the subsidiary later.

Meanwhile, British travel firm Thomas Cook jumped 1.25 percent to 24.3 pence as an upbeat company outlook offset news of deepening annual losses that were caused by the eurozone crisis, Middle East unrest and high fuel costs.

In Paris, shares in steel group ArcelorMittal fell 0.35 percent to 11.44 euros amid a dispute between the group and the French government which is threatening to nationalise part of the company's French activities.

VietNamNet/AFP