Europe's main stock markets closed higher on Wednesday (Sep 23), recovering some of the previous session's sharp losses as investors reacted positively to eurozone growth data.

London's benchmark FTSE 100 index finished 1.62 per cent ahead at 6,032.24 points in the capital, while the Paris CAC 40 closed 0.10 per cent up at 4,432.83 compared with Tuesday's close.

Frankfurt's DAX 30 ended 0.44 per cent higher at 9,612.62 points, lifted in part by a surge in scandal-battered Volkswagen's share price as group CEO Martin Winterkorn announced his resignation.

European indices had tumbled on Tuesday, dragged down by sharp losses to share prices of car manufacturers and miners on the Volkswagen pollution fraud scandal and a bleak outlook for China's economy, dealers said.

Traders appeared to mute those concerns long enough for Wednesday's rebound.

"Ironically, gains are despite disappointing Chinese manufacturing PMI data overnight which only adds to pre-existing concerns about the world's number two economy, but suggests markets are becoming increasingly accustomed to China data confirming a slower pace of economic growth," said Mike van Dulken, head of research at traders Accendo Markets.

Investors were more actively encouraged by continued signs of growth in the eurozone economy. Despite a slight dip in September, the eurozone still managed to expand at its fastest quarterly rate in four years, a key business survey showed on Wednesday.

'Steady growth of eurozone'

Data company Markit said the flash reading of its eurozone Purchasing Managers Index fell to 53.9 points in September from 54.3 points in August. Despite the drop, the reading was still comfortably above the 50 points mark signifying expansion.

The readings "pointed to steady growth of the eurozone economy at the end of the third quarter", Markit said.

The euro rose to $1.1163 from US$1.1132 late in New York on Tuesday, as markets followed comments by European Central Bank president Mario Draghi about the ECB's readiness to adapt its policies to kindle growth.

"Draghi... (reaffirmed) the ECB would take the 'necessary' steps to enhance monetary stimulus in the face of the worldwide economic risks currently threatening the region's recovery," said Spreadex analyst Connor Campbell, who noted the guardedly positive economic outlook allowed European bourses to hold "onto their morning gains with remarkable vigour as Wednesday continued."

On the corporate front, shares in auto giant Volkswagen rebounded by 5.19 per cent to €111.50 on the Frankfurt stock exchange, with investors apparently feeling CEO Winterkorn's resignation may help the company turn a corner on the emissions scam scandal that has battered its stock prices.

Volkswagen lost 35 per cent - or €25 billion (US$28 billion) - off the company's market value on Monday and Tuesday alone.

Winterkorn announced his resignation on Wednesday afternoon over the affair that has sparked a US criminal investigation and worldwide legal action with unfathomable financial consequences for VW.

Later in the day, Volkswagen's senior supervisory board said it would announce a new chairman on Friday, and consider other departures necessary to respond to the scandal.

Asian stocks closed lower after the monthly gauge of Chinese manufacturing activity in September hit a six-and-a-half-year low, sending indices across the region into the red.

US stocks initially followed Europe's positive lead at the open before heading downward on China concerns.

In early afternoon Wall Street trade, the Dow Jones Industrial Average was down 0.61 per cent at 16,320.62 points. The broad-based S&P 500 slid 1.23 per cent to 1,942.74, while the tech-rich Nasdaq Composite Index slipped 0.27 per cent to 4,743.69.