European stocks rebound as cryptocurrency markets stabilise after sell-off

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POLAND - 2021/05/18: In this photo illustration a Bitcoin logo seen displayed on a smartphone with stock market percentages in the background. (Photo Illustration by Omar Marques/SOPA Images/LightRocket via Getty Images)
The world's biggest crypto dropped below $32,000 (£22,562) at one point on Wednesday, with the slump hitting confidence in the broader market. Photo: Omar Marques/SOPA Images/LightRocket via Getty Images

Stocks in Europe staged a small rebound on Thursday after cryptocurrency markets began to recover from a major sell-off on Wednesday.

In London, the FTSE 100 (^FTSE) closed 0.9% higher, while the French CAC (^FCHI) jumped 1.2% and the DAX (^GDAXI) ended 1.5% ahead in Germany.

It came after cryptocurrencies tumbled amid concerns over a more activist approach from Chinese regulators. The sell-off accelerated from last week when Elon Musk turned against bitcoin (BTC-USD).

The world's biggest crypto dropped below $32,000 (£22,562) at one point on Wednesday, with the slump hitting confidence in the broader market. Ethereum (ETH-USD), the world's second biggest cryptocurrency, also fell as much as 30% during the session.

Data provider CoinMarketCap.com revealed that the value of the entire cryptocurrency market had fallen by 20% over 24 hours, wiping approximately $350bn off the market's value.

Read more: Cryptocurrency carnage: Billions wiped off market as Musk says Tesla has 'diamond hands'

Neil Wilson, chief market analyst at Markets.com, said: "Markets in Europe have opened broadly higher this morning as they recover some of the losses from the swathe of selling on Wednesday."

Concerns about inflation, which also hit stocks on Wednesday, appear to have eased slightly, after the Office for National Statistics (ONS) revealed that UK inflation more than doubled last month to 1.5%.

Data also showed that EU inflation was running at 1.6%.

Watch: What is inflation and why is it important?

Across the pond, the S&P 500 (^GSPC) climbed 1.2%, and the Dow Jones (^DJI) edged 0.9% higher at the time European markets closed. The tech-heavy Nasdaq (^IXIC) jumped 1.7%.

The positive gains come after Wall Street fell for a third consecutive session on Wednesday, however, the late rebound in crypto helped US markets to close well off their lows of the day.

Michael Hewson of CMC Markets said that investors seem “caught in a no-man's land of indecision between optimism over the economic reopening, and concern over central banks acting too late to address an inflationary surge.”

He added: “One of the narratives driving yesterday’s losses was concern that the Federal Reserve’s apparent lack of urgency over inflation could mean that they might be too late in the event prices suddenly start to run away to the upside.”

Last night, the Fed’s minutes showed that a number of participants were in favour of being more proactive in terms of tapering if the economy continued to make rapid progress towards the committees’ goals.

Read more: Inner city property roars back as UK reopens

Also in focus was the latest weekly jobless claims numbers which showed a fall to a new pandemic low last week.

US jobless claims fell to 444,000 for the week to May 15, 34,000 lower than the previous week's revised figure, which until today had marked the lowest level since March 2020 when coronavirus struck.

AnnElizabeth Konkel of jobs site Indeed.com said the US jobs market was moving in the right direction.

Meanwhile Rubeela Farooqi of High Frequency Economics said: "The message from the data remains one of a gradual decline in layoffs, although the level is still elevated.

"With reopening ramping up and businesses less constrained by restrictions, filings should ease further as the economy moves closer to normal capacity."

Asian markets were mixed in on Thursday. The Nikkei (^N225) in Japan ended the session 0.2% higher, while the Hang Seng (^HSI) in Hong Kong dropped 0.6% as it returned from a midweek holiday to play catch-up with Wednesday's global losses.

The Shanghai Composite (000001.SS) slipped 0.1%, with Seoul, Taipei and Manila also falling, however, there were gains in Sydney, Singapore, Wellington and Jakarta.

Watch: What are SPACs?

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