Asian shares closed steadier after earlier falls prompted by continuing worries about the scale of European debt.

Stocks pulled back from initial losses, with Japan's Nikkei 225 index pulling back from an opening fall of 1.8% to close 0.63% lower.

Hong Kong's Hang Seng was down 1% - again after an earlier, larger fall.

The recovery helped European markets to a higher start with gains of between 2-3%.

Juggling

South Korea's Kospi was up 0.62%, reversing an earlier decline of close to 4%. And Australia's ASX index also recouped earlier losses.

Analysts said that investors were trying to juggle a number of contradictory economic indicators, adding that markets were likely to remain choppy in coming sessions.

"We have had volatile markets in the past that have headed in one direction, but this time around no one seems to know what is going to happen," Andrew Robinson of Saxo Capital Markets told the BBC.

"On Tuesday, you had the Dow Jones up by 4%. If had you asked me then, I would have said it looks like we have bottomed out.

"But you wake up this morning to find that it is down by the same magnitude again."

Spreading concerns

Asian markets saw a sell-off in early trading, which was triggered by rumours that France may become the next country to lose its triple A credit rating.

I think there's concern about just how much Greek debt French banks really do hold Bret Barker, TCW

Concerns about European debt issues have rocked the markets for some time now, though the fears have mainly been limited to smaller, so-called peripheral economies, such as Greece and Portugal.

However, analysts said the emergence of new worries that the region's biggest economies may also be vulnerable has fanned fears further.

"As the economies get larger, the chances to bail them out are going to get slimmer," said Mr Robinson.

On Wednesday, France's Cac share index ended down 5.5% despite the French government's assurance that its credit rating was not under threat.

While ratings agencies Moody's, Standard & Poor's and Fitch reaffirmed France's AAA credit rating, analysts said investors remained sceptical about the country's financial health and the stability of its banking sector.

Shares of French lender Societe Generale fell as much as 20% after it was forced to "categorically" deny it was under financial pressure. The shares ended 15% lower.

"I think there's concern about just how much Greek debt French banks really do hold and how much the European Central Bank is willing to backstop all this," said Bret Barker of TCW.

Shifting focus

Image caption Asian markets have been volatile amid fears of a slowdown in the global economy

The uncertainty surrounding the US and European markets has seen investors shift their focus towards purchasing assets that are considered as offering greater protection from market volatility.

That has seen gold record its best rally in more than two years, and on Thursday in Asia it climbed above the $1,800 per ounce mark for the first time.

Analysts said that given the current global environment, the rise in gold is likely to continue.

"We don't see anything out there that's going to reverse the appetite for gold," Michael Lewis of Deutsche Bank.

"Given gold is a financial asset, it's interesting that it doesn't look that expensive at these sort of levels." he added.

Other markets

Also on Wednesday, London's FTSE fell by 158 points to 5,007, taking £41bn off the value of the index. It has now lost almost 15% in the last nine trading sessions.

UK banking shares were also hit, with Barclays down 8.7%, Royal Bank of Scotland 7.3%, and HSBC 5.3%.

On Wall Street, the Dow Jones Industrial Average lost 4.6%, or 520.29 points to close at 10,719.48 in its fifth straight day with a rise or fall of more than 400 points.

New York's broader S&P 500 index fell 51.81 points, or 4.42%, to 1,120.72.