Japanese stocks advanced as increased U.S. hiring boosted the earnings outlook for exporters. Gains were limited before reports expected to show Europe may be edging toward recession.

Sony Corp., which depends on the U.S. for 20 percent of its sales, rose 0.5%.

Nomura Holdings Inc. climbed 3.2% on speculation the resignation of its wholesale banking chief will allow the brokerage to revamp after overseas losses.

Tokyo Electric Power Co., which operates the crippled Fukushima Dai-Ichi nuclear plant, fell 6.1% after soaring as much as 29% yesterday on speculation it will avoid delisting.

European stocks fell from a one-week high as Fitch Ratings said the European Central Bank must do more to prevent debt crisis from spreading and a report indicated the German economy is shrinking.

Metro AG, Germany’s largest retailer, declined 3.3% after Benjamin Peters, an analyst at UBS AG, cut the stock to “sell” from “neutral.” The shares “will come under increasing pressure from earnings downgrades,” Peters wrote in a report.

Nestle SA, the world’s biggest food company, fell 1.7% after Bank of America Corp. downgraded the stock to “neutral” from “buy.”

Aryzta AG, a Swiss supplier of bakery products to supermarkets and restaurants, tumbled 6.8% after it sold 4.25 million new shares at 41 francs each. That was the largest drop since April 2009 and the worst performance in the Stoxx 600 today.

Italian banks advanced today, with Banca Popolare di Milano Scarl jumping 9.4%. Banca Monte dei Paschi di Siena SpA increased 8.1%. UniCredit SpA gained 5.5% as the shares were raised to “outperform” from “underperform” by Sanford C. Bernstein & Co. analysts, who cited the stock’s “now attractive” valuation. The bank was also upgraded to “neutral” from “reduce” by WestLB.

U.S. stocks rose  as gains in banking and technology shares helped the market recover from an early slump spurred by growing signs Europe may slip into a recession.

Citigroup Inc. (+4,23%) led banks higher after analyst Dick Bove said the shares could “easily” triple in five years.

Germany’s Federal Statistics Office said the economy probably shrank in the fourth quarter from the third and three research institutes forecast in a joint report that the euro-area economy contracted in the fourth quarter and will continue to decline in the first three months of 2012. The Federal Reserve said that the U.S. economy improved last month across most of the country even as hiring was limited and housing remained stagnant.

Microsoft (MSFT) Corp. (-0,43%) recovered from earlier losses triggered after the world’s largest software maker said industrywide sales of personal computers will probably be lower than analysts projected in the fourth quarter because supply was hurt by flooding in Thailand.