LONDON – European shares rose but US stocks futures pointed to a further tech sell-off in Wall Street, as market participants weighed up signs of economic recovery against fears of inflation.

Falling tech stocks pulled Asian markets lower overnight, as recent gains in US Treasury yields put lofty valuations under pressure.

In his testimony before the US Senate on Tuesday, Federal Reserve Chair Jerome Powell did not seem too worried about rising yields, telling Congress they were a statement on the market’s confidence in the pandemic recovery.

“Powell’s comments reinforce our view that the increase in inflation expectations is most likely transitory and that higher Treasury yields primarily reflect optimism over the economic recovery and the reflation trade,” wrote UBS chief investment officer for global wealth management, Mark Haefele, in a note to clients.

“Investors should expect an extended period in which interest rates remain below inflation.”

European indexes recovered some recent losses, with the STOXX 600 up 0.3 percent at 1150 GMT, but still down almost 2 percent from the one-year high it hit last week.

Germany’s DAX was up 0.7 percent, helped by stronger-than-expected GDP gains in Europe’s largest economy. The FTSE 100 was up 0.1 percent.

The MSCI world equity index, which tracks shares in 49 countries, was down 0.3 percent.

US futures pointed to a mixed open for Wall Street, with S&P 500 e-minis up 0.1 percent but futures for the tech-heavy Nasdaq in decline for the seventh consecutive day.

“We’re seeing a modest recovery at this point, so there’s still clearly a lot of caution,” said Craig Erlam, senior market analyst at OANDA, who said the stock market falls this week were largely a “blip”.

“I think central banks are going to continue to talk down tightening prospects,” he added.

The 10-year US Treasury yield rose, although it was below the one-year high it reached on Monday.

Tech stocks are particularly sensitive to rising yields because their value rests heavily on earnings in the future, which are discounted more deeply when bond returns go up.

Bitcoin recovered somewhat, up 3.3 percent at around US$50,481 at 1202 GMT.

“I suspect we are in a bubble in certain places, that stimulus cheques will provide more fire to that at some point but that risk assets are going to be constantly buffeted by the risk of higher yields and inflation regardless of whether it has any structural roots or not,” wrote Deutsche Bank strategist Jim Reid in a note to clients.

But, one year on from the start of the COVID-19 market crash, financial market participants were generally upbeat about the prospect of vaccine rollouts, lockdowns ending and economies re-opening.

Strong exports and solid construction activity helped the German economy to grow by a stronger-than-expected 0.3 percent in the final quarter of last year, the Federal Statistics Office said on Wednesday, revising up an earlier estimate.

US consumer confidence increased in February and Britons rushed to book foreign holidays after the government laid out plans to relax restrictions. But EU government leaders will agree on Thursday to maintain curbs on non-essential travel within the bloc.

OANDA’s Craig Erlam said that market consensus is that there will be no further lockdowns in Europe and the United States after the summer.

“Markets are working on the assumption that we are at the end of the tunnel, we’re right near the end of the tunnel, and we’re not going back in,” he said.

The dollar was broadly flat against a basket of currencies , while euro-dollar was slightly up at US$1.2166 EUR=EBS.

The benchmark 10-year German Bund was steady.

Elsewhere, oil prices rose, although a surprise build-up in US inventories last week limited the gains.

Brent and US West Texas Intermediate (WTI) crude futures have both risen by around 28 percent so far in 2021.