With U.S. markets closed for Thanksgiving, focus was trained on Europe where a surge in COVID-19 cases is raising the prospect of lockdowns going into the Christmas shopping season.
Those concerns had knocked the pan-European STOXX 600 index to a three-week low on Wednesday, but it was up almost half a percent as a 1% tech sector gain offset the eighth straight fall in travel and leisure stocks.
"We continue to treat every sell-off as the buy-the-dip opportunity," said Marija Veitmane, global markets strategist at State Street Global Markets, adding that firms' earnings were still robust and that borrowing costs were still very low.
An indicator of the bullishness underpinning equity markets can be seen in data. Year-to-date inflows into equity funds have barreled past the $1 trillion mark, more than the combined previous 19 years of flows, according to BofA strategists.
In the government bond markets, which drive those borrowing costs, there was a small dip in German yields after Social Democrat and former finance minister Olaf Scholz struck a three-way coalition deal on Wednesday that sees him replace Angela Merkel at the helm of Europe's largest economy.
It was the first fall in yields in three days. They have risen sharply again this week as traders have ramped up bets that rising inflation will see the European Central Bank join the U.S. Federal Reserve in hiking interest rates next year. [GVD/EUR]
"The inflation debate, whether is it temporary or not, is still there," said Dirk Schmacher, Head of European Macro Research at Natixis.
He also flagged the renewed lockdown in Austria and the fast rising COVID-19 case numbers in parts of Germany and elsewhere in Europe.
Emerging markets saw some relative calm after a turbulent few days that has seen Turkey's lira battered again, Russia and Ukraine tensions rise, and Mexico's president stoke worries about central bank independence by installing a virtual unknown at the helm. [EMRG/FRX]
The lira shrugged off early losses to rise 0.5%, extending Wednesday's gains which came after a brutal 11-day, 24% losing streak after President Tayyip Erdogan had backed more interest rates cuts.
Russia's rouble moved away from recent four-month lows as Moscow said it hadn't turned its back on Eastern Ukraine peace talks, while South Africa's rand recovered from a one-year trough.
In Asia overnight, the tech recovery that had been kicked off by the Nasdaq [.N] helped Japan's Nikkei finish 0.7% higher and meant Hong Kong's tech index was able to snap six sessions of losses.
Other share moves were more muted however. MSCI's broadest index of Asia-Pacific shares outside Japan finished flat after little movement all day. [.T][.SS]
In broad terms, "when it comes to regional equities allocation, we're watching the U.S. dollar which is making new highs and that is a headwind for emerging market equities," said Fook-Hien Yap, senior investment strategist at Standard Chartered Bank wealth management.
The dollar is trading near its highest in almost five years versus the Japanese currency at 115.3 yen, and consolidating a near 18-month high against the euro which was a fraction higher at $1.1222. [FRX]
Several U.S. Federal Reserve policymakers have said in recent days that they would be open to speeding up the tapering of the central bank's bond-buying programme if the high rate of inflation held, and move more quickly to raise interest rates, minutes of the Fed's Nov. 2-3 policy meeting showed.
"The market is now pricing in more than two hikes next year, but we think that is overly aggressive. We are only looking for about one hike next year," said Yap. Goldman Sachs expects three rate hikes next year.
These expectations have pushed U.S. treasury yields higher, albeit inconsistently, with benchmark 10-year notes closing for the Thanksgiving break at 1.6427% having risen as high as 1.6930% on Wednesday.
U.S. Treasuries and U.S. stock markets will resume on Friday albeit for shortened session meaning trading is almost certain to be thin.
Oil prices see-sawed meanwhile after a turbulent few days in which the United States said it would release millions of barrels of oil from strategic reserves in coordination with China, India, South Korea, Japan and Britain to try to cool oil prices after calls to OPEC+ to pump more went unheeded.
Investors had already largely priced the move though, after more than a week of signals from the major players, meaning Brent actually jumped on Wednesday. It was last trading at $82 a barrel in London, which was up 6% from the week's lows but down fractionally lower on the day. [O/R]
Spot gold edged 0.17% higher to 1791 an ounce.
(Additional reporting by Saikat Chatterjee and Sujata Rao in London and Alun John in Hong Kong, Editing by Angus MacSwan, William Maclean and Toby Chopra)
By Marc Jones