Asian and European stocks mostly rose on Tuesday as calm returned following last week’s rout, but analysts warned of more pain after central bank officials hinted at further interest rate hikes to tackle soaring inflation.

Wall Street reopens later and is expected to burst higher as traders play catch-up following a three-day holiday weekend, but inflation jitters still fester.

Oil prices extended gains on hopes of improving energy demand in key consumers China and the United States, while the euro climbed on the prospect of rising eurozone borrowing costs.

“Risk appetite has managed to recover for now, perhaps because we get a much needed-break from central bank decisions this week,” IG analyst Chris Beauchamp told AFP.“But while a bounce is overdue, it is probably only temporary.”

There remains an overarching sense of gloom as traders speculate that the sharp lift in borrowing costs around the world will tip economies into recession.

There remains an overarching sense of gloom as traders speculate that the sharp lift in borrowing costs around the world will tip economies into recession

Focus this week is on Federal Reserve boss Jerome Powell’s two days of testimony to lawmakers in Washington, which will be closely watched for insight into the bank’s thinking and possible clues about its plans for fighting surging prices.The Fed announced a three-quarter interest rate hike last week, after inflation data days earlier had smashed forecasts and hit a four-decade high.

While the volatility of last week has gone, banks’ intention to continue hiking rates could cause fresh ructions in markets.

“A sprinkle of positivity is sugaring financial markets, masking the bitter taste induced as investors have been forced to assess the repercussions of surging inflation for the global economy,” said Hargreaves Lansdown analyst Susannah Streeter.

Several officials – including at the Fed, Bank of England, Reserve Bank of Australia and European Central Bank – have come out in recent days to flag a further tightening of borrowing costs.

Inflation has rocketed to multi-decade highs around the world on a host of factors including the global supply crunch and the Ukraine conflict, which has fuelled strong gains for food and energy prices.