BANGKOK: Asian stocks fell Thursday as Japanese business confidence and Chinese manufacturing both slipped, but European shares rose as data showing the region's economic output contracted less than anticipated.

Benchmark oil rose to near $96 per barrel after a big slide the day before while the dollar rose against the euro but fell against the yen.

Stock markets headed higher in early European trading. Britain's FTSE 100 rose 0.7 percent to 5,404.36. Germany's DAX jumped 1.1 percent to 5,734.83 and France's CAC-40 added 0.9 percent to 3,001.80.

The purchasing managers' index published by financial data company Markit showed eurozone manufacturing and services output contracting for a fourth month in December, although at the slowest rate since September. The composite output index stood at 47.9 in December, up from 47.0 in November.

"The December Eurozone purchasing managers? surveys are better than feared and show welcome, much-needed improvement. However, the likelihood remains that Eurozone GDP will contract in the fourth quarter, even if the decline may not be as has been feared," said Howard Archer of IHS Global Insight in a report.

But stocks faced strong headwinds earlier in Asia as business confidence fell in Japan and Chinese manufacturing data showed a contraction, although at a slower rate.

Japan's Nikkei 225 index shed 1.7 percent to close at 8,377.37, a three-week low. South Korea's Kospi lost 2.1 percent to 1,819.11 and Hong Kong's Hang Seng tumbled 1.8 percent to 18,026.84.

Mainland Chinese shares lost ground for a sixth straight trading day, with the benchmark Shanghai Composite Index falling 2.1 percent to 2,180.90, while the Shenzhen Composite Index lost 2.3 percent to 886.01.

In Japan, confidence at major manufacturers fell over the last quarter. The Bank of Japan's "tankan" survey of business sentiment fell to minus 4.

The figure represents the percentage of companies saying business conditions are good minus those saying conditions are unfavorable, with 100 representing the best mood and minus 100 the worst.

Japan's strong yen has hit multiple historic highs this year against the dollar, making business conditions difficult for Japan's export-reliant economy.

Meanwhile, preliminary manufacturing figures showed that Chinese factory output contracted, but at a slower rate, in December. HSBC's purchasing manager's index for December stood at 49.0, up from 47.7 in November. Any number below 50 indicates a contraction in manufacturing activity.

But the figure didn't raise hopes that China might ease its monetary policy anytime soon.

"I don't think there will be an interest rate cut in the short-term," said Dickie Wong, executive director of research at Kingston Securities Ltd. in Hong Kong. "Sentiment is really bad in China."

On Wall Street, stocks plummeted Wednesday amid a growing sense that Europe's leaders have failed to contain that region's debt crisis.

Since European leaders reached an agreement to rein in future government budget deficits last week, investors and credit rating agencies have criticized the deal for failing to address current problems.

Italy had to pay higher borrowing rates in its last bond auction of the year Wednesday. The third-largest economy among the 17 nations the use the euro paid 6.47 percent interest to borrow 3 billion euros ($3.95 billion) for five years - up 0.17 percentage point from last comparable auction - and the highest rate since the euro came into existence in 1999.

The higher rates make it more expensive for Italy to borrow money and reflect rising doubts that the country will be able to repay its debts.

Oil prices, which plunged more than $5 on Wednesday, drove down energy-related shares. South Korea's S-Oil Corp. fell 4.7 percent. Hong Kong-listed China National Offshore Oil Corp. dropped 4.6 percent.

Asian banking shares fell on the heels of a downgrade by Fitch Ratings of five major European commercial banks and cooperative banking groups. Hong Kong-listed Industrial & Commercial Bank of China, the world's largest bank by market value, fell 2.6 percent. Australia's Westpac Banking Corp. fell 1.8 percent.

The Dow Jones industrial average fell 1.1 percent to close at 11,823.48 on Wednesday. The Standard & Poor's 500 index fell 1.1 percent to 1,211.82. The Nasdaq fell 1.6 percent to 2,539.31.

Benchmark oil for January delivery was up 76 cents at $95.71 a barrel in electronic trading on the New York Mercantile Exchange. The contract declined $5.19 to finish at $94.95 per barrel on the Nymex.

In currency trading, the euro slipped to $1.2975 from $1.2977 late Wednesday in New York. The dollar slipped to 77.92 yen from 78.07 yen.