European stock markets extended gains Tuesday despite Asian and US losses as investors assessed the outlook for global interest rates, dealers said.
Equities rebounded Monday from last week's heavy selloff as inflation fears faded and investors were encouraged by progress on coronavirus vaccine rollouts and by President Joe Biden's $1.9 trillion stimulus package, which is moving towards passage in Congress.
But the rally did not carry over into Asian trading, and Wall Street also fell prey to profit-taking, ending the day solidly lower despite US approval of a new Johnson & Johnson single-dose Covid-19 vaccine and word Tuesday of a deal with rival Merck to produce the jab also helped sentiment.
After markets closed Biden announced there would be sufficient vaccines available for every adult in the United States by the end of May, sooner than previously expected.
"Today's session has far been mixed for risk assets, as investors try to weigh the impact of rising yields against the prospects of a strong economic rebound with the ongoing Covid vaccine rollouts," said market analyst Fawad Razaqzada at ThinkMarkets.
The rise in yields on government bonds in the United States and other key economies last week sparked a market meltdown, which was exacerbated as traders sought to lock in gains.
Higher yields prompted worries about a sudden shift in monetary policy toward higher interest rates to contain rising prices. However, a stabilization in the bond market on Friday and Monday appears to have staunched the bleeding for now.
Analysts said worries over a surge in inflation and accompanying rate hikes have been overdone.
- Euro ducks under $1.20 -
News Tuesday of steady eurozone inflation sent the European single currency briefly below $1.20 for the first time in three weeks as it, too, dampened speculation about higher interest rates.
The Eurostat agency said inflation in the 19 countries that use the euro ran at 0.9 percent last month, the same as in January.
In Asia, equities sank after a top Chinese regulator raised concerns that bubbles were forming in the financial markets.
US and European markets were not reflective of their underlying economies and would face corrections "sooner or later," said Guo Shuqing central bank member and chair of the China Banking and Insurance Regulatory Commission.
Guo's comments come after a number of observers warned equities were due a retreat following a year-long advance from their March 2020 nadir.
"This is hardly a new phenomenon; there's been talk about bubbles in US markets for months and China's property market isn't immune to these sorts of concerns either," said analyst Michael Hewson at CMC Markets UK.
In commodities, oil prices dropped ahead of an OPEC+ producer meeting on Thursday, where markets will watch for signs of how much the group will step up output as the global economy appears set to shift up into gear as vaccines roll out.
"The energy market is bracing for more supply to come into the market, but continued vaccine optimism and global reopening hopes will likely limit most of the downward pressure with oil prices," said Edward Moya at Oanda currency trading platform.
- Key figures around 2210 GMT -
New York - Dow: DOWN 0.5 percent at 31,391.52 points (close)
New York - S&P 500: DOWN 0.8 percent at 3,870.29 points (close)
New York - Nasdaq: DOWN 1.7 percent at 13,358.79 points (close)
EURO STOXX 50: UP less than 0.1 percent at 3,707.72 (close)
London - FTSE 100: UP 0.4 percent at 6,613.78 (close)
Frankfurt - DAX 30: UP 0.2 percent at 14,039.80 (close)
Paris - CAC 40: UP 0.3 percent at 5,800 (close)
Tokyo - Nikkei 225: DOWN 0.9 percent at 29,408.17 (close)
Hong Kong - Hang Seng: DOWN 1.2 percent at 29,095.86 (close)
Shanghai - Composite: DOWN 1.2 at 3,508.59 (close)
Euro/dollar: UP at $1.2089 from $1.2049 at 2200 GMT
Pound/dollar: UP at $1.3953 from $1.3925
Euro/pound: UP at 86.56 pence from 86.53 pence
Dollar/yen: DOWN at 106.68 yen from 106.76 yen
Brent North Sea crude: DOWN 1.9 percent at $62.50 per barrel
West Texas Intermediate: DOWN 1.9 percent at $59.47 per barrel