European Markets Flat, Asia Gains

"I think people are catching their breath and seeing how things go," said Gerhard Schwarz, head of equities strategy at UniCredit. "We have of course seen an improvement in several leading indicators ... the big question is, how sustainable is this improvement?"

Asian markets retreated midday after North Korea announced that it had successfully carried out an underground nuclear test. The country's official Korean Central News Agency called it "part of measures to bolster its nuclear deterrent for self-defense."

But investors soon tempered their reaction, turning their attention to domestic issues and the upcoming week's economic reports for further clues about the outlook for the U.S. and global economies.

South Korea's benchmark Kospi index erased nearly all its losses. It plunged as much as 6.3% before bouncing back to end just 0.2% lower at 1,400.90. The won also recovered from a drop against the dollar.

Tokyo's benchmark Nikkei 225 stock average rose 121.19 points, or 1.3%, to 9,347.00 on a slightly weaker yen and gains by steel and drug makers. Hong Kong's Hang Seng index rose 0.4% to 17,121.82.

The region's markets have grown accustomed to such maneuvering by North Korea, said Linus Yip, a strategist at First Shanghai Securities Ltd. in Hong Kong.

"For the South Korean market, it's just an excuse for the market to make a correction because markets have shot up too much recently," Yip said. "But I don't see any great impact in other Asian markets."