Europe's sovereign debt markets were back in focus Wednesday after poorly-received bond sales from Spain and Portugal lifted borrowing costs and hit stock markets across the region.

Benchmark 10-year government bonds yields for Spain, Italy and Portugal were all higher in an active trading session in Europe, which followed a grim series of service-sector data from around the region suggesting the Eurozone is unlikely to avoid recession this year.

The single currency fell to a two-week low against the British pound after the reports, while the broadest measure of equity market performance, the FTSE Eurofirst 300, slid 1.3 percent to trade at 1,058.81 by 2:30pm London time - just two points from its 2012 low.

Borrowing costs for the two separate bond auctions in Spain were significantly higher than in March and suggested investors were yet to be convinced by the €27bn in spending cuts unveiled by Prime Minister Mariano Rajoy in his budget last week.

Portugal's debt sale fared little better. The €1bn auction of 18-month "treasury bills", the longest instrument from the country's debt management agency since the EU/IMF bailout last year, were sold at an average yield of 4.537 percent, roughly three times the 10-year borrowing costs of Germany and France.