European stock markets extended gains on Tuesday despite Asian and US losses as investors assessed the outlook for global interest rates, dealers said.

Equities rebounded on Monday from last week's heavy selloff on easing US money market rates as inflation fears faded and investors were encouraged by progress on coronavirus vaccine rollouts and President Joe Biden's $1.9-trillion stimulus package advanced towards passage.

But the rally did not carry over into Asian trading, and Wall Street also fell prey to profit-taking soon after the opening bell.

"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 US and other key economies last week sparked a market meltdown which was exacerbated by profit-taking.

Higher yields had prompted worries about a sudden shift in monetary policy toward higher interest rates.

However, a stabilisation in the bond market on Friday and Monday appears to have staunched the bleeding for now and analysts said worries over a surge in inflation and rate hikes have been overdone.

Euro ducks under $1.20

News 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 per cent 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 China Banking and Insurance Regulatory Commission chairman and central bank member Guo Shuqing.

Guo's comments come after several observers warned equities were due a retreat following a year-long advance from their March 2020 nadir.

"Asia markets have slipped back today after Chinese regulators warned on the prospect of asset bubbles in overseas markets," said analyst Michael Hewson at CMC Markets UK.

"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."

In commodities, oil prices wobbled ahead of a key OPEC+ producer meeting on Thursday, with the markets watching by how much it will step up output as the global economy appears set to shift up a gear as vaccination campaigns 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.