US stocks rebound following inflation scare

US stocks rebounded on Thursday, a day after slumping on worries that soaring US inflation could trigger interest rate rises sooner than expected, and in turn harm global economic recovery.

Focus was also on bitcoin, which fell sharply after Tesla's Elon Musk stopped allowing people to pay for his electric cars with the cryptocurrency.

While US stocks pushed higher at the open, their sharp losses on Wednesday pulled Asian and European stocks along with them on Thursday.

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Tokyo's main stocks index closed down 2.5 percent and European stocks also suffered sharp losses but started to recover as the opening bell in New York approached.

The Dow was up 1.2 percent in late morning, on track to end a three-day losing streak, and in Europe both Frankfurt and Paris managed to close higher.

With little in the way of news to spur the reversal, this invites "the notion that the scope of recent losses has gone far enough to whet the appetite of buy-the-dippers who have successfully feasted over the last year or so on down moves like the one that has recently unfolded," said analyst Patrick J. O'Hare at Briefing.com.

Stock markets were already awash with red this week owing to growing fears that the blockbuster global economic recovery and vast stimulus measures will see cashed-up consumers go on a pent-up spending spree that will strain supplies and push up costs.

And those concerns were given oxygen Wednesday by figures showing US consumer inflation spiked at 4.2 percent in April, far higher than estimates and the highest since 2008 just before the global financial crisis kicked in.

That was followed on Thursday by data showing that producer prices jumped by 6.2 percent in April, the highest pace since 2010.

The advances were driven by a rally in commodity prices such as widely-used copper, iron and lumber, which are sitting at record or multi-year highs.

Tech firms, which blossomed during lockdowns as people were forced to stay home, have led the share-price losses as they are more susceptible to higher interest rates.

Tech shares stabilised on Thursday.

The Fed has repeatedly insisted it expects such sharp price spikes but they will be transitory owing to last year's low base and policymakers will not make any adjustments until they are happy unemployment is under control and inflation is running hot for some time.

However, investors are not convinced and there is growing unease that the central bank could lose control of the situation if it does not act in time, with analysts warning it could risk people's confidence in the institution.

"In an extremely fickle environment markets are continuing to wrestle with the dilemma as to whether the current bout of rising inflation prints is transitory in nature," CMC Markets UK analyst Michael Hewson said.

A drop in US new jobless claims to another pandemic-era low last week helped boost sentiment on Thursday.

Regarding bitcoin, meanwhile, Musk cited the environmental impact caused by the computing-intense mining process of creating new units as a reason to halt accepting them as payment.

The move quickly sent the cryptocurrency slumping 16 percent.

It later recovered before trading down around ten percent at $50,200 on Thursday.

The main US oil contract fell by 3.0 percent as the main East Coast pipeline announced it was resuming operations, easing supply concerns.