Stock markets put in gains Tuesday after a heavy session of losses the previous day, though the respite from worries over U.S. and European government debt looked only temporary.

The dollar slipped but remained near a six-week high against a basket of currencies <.DXY>, indicating that flows into traditionally safer U.S. assets were holding up.

Pressure also remained on debt from peripheral euro zone economies.

Focus will be on a Spanish auction of up to 3 billion euros of 3- and 6-month Treasury bills, where borrowing costs are expected to surge by around two percentage points, with no respite from the center-right Popular Party's emphatic election win on Sunday.

World stocks as measured by MSCI <.MIWD00000PUS> were up half a percent. The pan-European FTSEurofirst <.FTEU3> gained nearly 1 percent after a 3.3 percent loss on Monday.

It was viewed as a rebound from losses rather than any major turning point.

This does not look like any weakness that one could buy into with a high degree of confidence, said Jeremy Batstone-Carr, strategist at Charles Stanley.

Earlier, Japan's Nikkei <.N225> fell to an 8-month low before recovering somewhat to close down 0.4 percent.

Investors are rattled by the continuing stress on euro zone debt markets, but also by the apparent inability of U.S. officials to come to grips with debt in their own economy.

A bipartisan U.S. deficit-reduction committee admitted defeat on Monday and abandoned a three-month effort to find $1.2 trillion in budget cuts.

All three major ratings agencies confirmed on Monday they were holding off taking immediate action on the U.S. rating, although Fitch said it could cut its outlook from stable.

SPAIN IN VIEW

German Bund futures slipped, taking a breather after their full point rally the previous day, but losses were limited with peripheral euro zone bonds remaining under pressure.

Spain are moaning about levels of funding, the political mess over how to tackle (the debt crisis). It's a bit more of the same. Liquidity in the market is not good, a trader said.

Jefferies Group Inc (JEF.N) became the latest bank to cut its exposure to the debt of Europe's struggling states, saying late on Monday had reduced gross exposure to debt of Greece, Ireland, Italy, Portugal and Spain by a total of nearly 75 percent since worries first surfaced in early November.

Such cuts help explain the rising yields, which go up when demand falls.

On foreign exchanges, the euro was slightly higher against the dollar although severe dollar funding strains are supporting the U.S. currency as European banks scramble to secure cash dollars.

There is no fundamental change in the markets' risk averse mood. There's been no clear progress in the euro zone, said Koji Fukaya, chief FX strategist at Credit Suisse.

(Additional reporting by Brian Gorman and Emelia Sithole-Matarise; editing by Patrick Graham)

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