European stock markets rose on Tuesday, with a G7 countries warning of foreign exchange volatility pushing up the yen, while dealers also digested news of job cuts across the banking, airlines and telecoms sectors.
London's FTSE 100 index of leading companies rose 0.98 percent to close at 6,338.38 points, while Frankfurt's DAX 30 added 0.35 percent to 7,660.19 points and in Paris the CAC 40 climbed 0.99 percent to 3,686.58 points.
Markets shrugged off a defiant North Korea staging its most powerful nuclear test yet and warning of "stronger" action to follow if the ensuing wave of global condemnation translated into tougher sanctions.
However a warning by the Group of Seven top industrialised nations amid growing rumblings of a "currency war" sent the yen climbing.
The G7 said on Tuesday that "excessive volatility" in exchange markets undermines stability.
Japan's recent monetary easing which has pushed down the yen, has stoked fears, especially in Europe, of a so-called "currency war" between the major economies as policymakers seek to devalue their currencies to make exports more competitive.
The yen strengthened against both the dollar and euro.
It took 93.11 yen to buy a dollar in London deals compared to 94.33 late on Monday. It took 125.25 yen to buy a euro compared to 126.42 on Monday.
The European single currency stood at $1.3450 compared with $1.3404 late in New York on Monday.
"The currency war rhetoric is still making the headlines fuelling speculative interests," said Anita Paluch at Gekko Markets.
Commerzbank said the debate about a "depreciation race" and "currency war" was beginning to take on a life of its own with officials comments being overinterpreted.
"This hysteria is likely to continue until the G20 meeting of central bankers and finance ministers over the weekend," with currency trading to remain volatile, said the bank.
Meanwhile gold prices fell to $1,647.50 an ounce from $1,652 in trading on Monday on the London Bullion Market.
Shares in Barclays bank were the top performer in London, surged 8.57 percent to 327.35 pence, topping London's FTSE 100.
While the British bank revealed that it had plunged into an annual net loss amid the Libor rate-rigging crisis, investors took relief that the scandal-hit lender was moving forward with restructuring with the announcement it would cut at least 3,700 jobs this year and slash costs.
"In all, the strategy update and results are largely in line with expectations," said Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers.
"A series of legacy issues such as Libor continue to overhang, whilst increased regulatory and capital requirements continue to reduce prospective investment returns going forward."
Shares in International Airlines Group rose 2.6 percent to 221.8 pence after it announced plans to cut 3,800 jobs at Iberia airline, about 700 fewer than it had planned in November.
In Paris, France Telecom shares fell 0.67 percent to 7.83 euros after Orange Poland, which it controls, said it would axe 1,700 this year.
Asian stock markets closed mixed in holiday-thinned trade, with Tokyo boosted by a weaker yen, while Seoul was lower after news that North Korea had successfully tested a nuclear bomb.
With several Asian markets still closed for Lunar New Year celebrations, trading was quiet, while dealers look ahead to a meeting of the Group of 20 top economic power at the end of the week.
"With ground to make up from a long weekend the overnight Asian markets were very positive until news that North Korea has carried out nuclear testing slightly derailed sentiment," said Alastair McCaig, market analyst at IG trading group in London.
US stocks traded narrowly mixed as markets looked ahead to President Barack Obama's State of the Union address in the evening.
The Dow Jones Industrial Average rose 0.24 percent to 14,004.56 points in midday trading.
The S&P 500 index edged up 0.09 percent to 1,518.38 points, while the tech-rich Nasdaq Composite dipped 0.16 percent to 3,186.88 points.
Investors will be watching Obama's nationally televised speech at 0200 GMT Wednesday to gauge "content and tone as a guide for assessing the likelihood of avoiding sequestration slated to go into effect March 1," said Patrick O'Hare of Briefing.com.
Massive spending cuts are due to kick in on March 1, which analysts worry could trip the US economy back into recession, unless the Obama administration and Republicans can agree on alternatives.