The pound edged up against the dollar on Tuesday, for the first time since Britain's vote to exit the European Union had sent it downward last week.
The pound rose 0.81 per cent to 1.33 dollars in the morning, after having reached the lowest rate since 1985 on Monday at 1.31 dollars.
London's FTSE 100 stock index climbed 2.19 per cent to 6,113, while Germany's Dax index rose at a similar rate of 2.13 per cent to 9,465 points.
"Yes we've seen three ratings downgrades for the UK overnight, but taking a glass-half-full perspective, this also means that just a little of the uncertainty is starting to ebb away," said Tony Cross, a British analyst at Trustnet Direct.
The Brexit vote had shocked global markets, as it created worries that Britain's large economy could slip into a recession, and that a drawn-out divorce process from the EU could create an uncertain atmosphere across Europe.
In Japan, shares were mixed Tuesday as market sentiment was still hurt by heavy overnight losses on Wall Street and in European equities following the Brexit vote.
The benchmark Nikkei 225 Stock Average gained 0.09 per cent to end at 15,323.14, while the broader Topix index was down 0.09 per cent, to close at 1,224.62.
After a weak start, the Nikkei bounced back in the afternoon amid expectations of government economic stimulus measures and more monetary easing by the Bank of Japan, the Nikkei business daily reported, citing traders.