European shares jumped more than 1 percent and the euro strengthened on Wednesday on signs of continued German growth and Spain's plans to cut its deficit.

Investors were also continuing to adjust their positions following the European Union's sovereign debt rescue plan.

MSCI's all-country world stock index <.MIWD00000PUS> was up 0.4 percent, led by Europe, where the FTSEurofirst 300 <.FTEU3> gained 1.1 percent gain after starting slightly lower.

World shares gained nearly 5 percent on Monday after the EU and the International Monetary Fund agreed a 750 billion euro rescue plan to stop Greece's debt crisis spilling over into other economies. Markets slipped back a bit on Tuesday.

The rescue plan has drawn a line under the worst fears about a spread of the euro zone debt crisis, leaving investors to look at what countries are doing to improve their situations.

(It) is likely to shift markets' attention to the actual implementation of the promised fiscal reforms and economic performance in response to them, Barclays Capital said in a note.

If these disappoint, the very positive market reaction of recent days may not last.

This was on display in a positive way after Spanish Prime Minister Jose Luis Rodriguez Zapatero announced public spending cuts of 6 billion euros and said civil servant wages would be slashed by 5 percent this year as part of a drive to meet EU deficit targets.

The measures are designed to bring the country's budget deficit to 6 percent of gross domestic product in 2011 from 11.2 percent in 2009.

Germany's GDP also grew for the fourth quarter in a row.

EURO FIRMS

The euro climbed 0.4 percent against the dollar to $1.2708.

Earlier the currency had weakened with some investors concerned that the EU rescue plan does not solve the fundamental issues facing the bloc's finances.

Core euro zone government bond futures turned negative marking a session low at 125.43 after Spain's austerity measures were announced.

The talk is certainly in the right direction across the board in the peripheral nations and that's caused quite a decent sell-off in the Bund this morning, said a bond trader.

(Additional reporting by George Matlock; editing by Jason Webb)

Germany