The White House said on Thursday that European institutions could cope with the euro zone's debt crisis which has hit global financial markets and said it was watching the situation "very closely." President Barack Obama has spoken in recent days with the leaders of Germany, France, Spain, Britain and Italy, and the administration remains in close contact with the region, whose problems have lashed U.S. markets and sapped its own recovery. "We believe that Europe's institutions have the capacity to handle this situation and continue to monitor it ... very closely," White House press secretary Jay Carney told reporters traveling with Obama for a factory visit in Michigan, Reuters reported. U.S. and European stock markets rallied on Thursday but confidence remains extremely fragile. Investors worry that some euro zone banks have suffered huge losses on European government debt, invoking memories of the failure of U.S. investment bank Lehman Bros. in September 2008. "It is clear some of the turbulence that we've seen here in the United States has been due to ... the economic headwinds emanating from Europe," Carney said. The Dow Jones Industrial Average was up by more than 432 points in afternoon trade on Thursday at 11,152, after closing down 519 points the day before. However, the index remains well below a 12,754 point peak touched last month, before confidence was slammed by Europe's woes and a toxic U.S. debt ceiling debate that led to the downgrade of the country's AAA credit rating on Friday. -- SPA