Major stock markets diverged on Thursday as concerns over further hikes to US interest rates lingered, with officials warning on the need to keep fighting stubbornly-high inflation.

Many indices reversed direction a day after gaining on forecast-busting Chinese data that reinforced optimism the world's number two economy would bounce back strongly this year as it emerges from its pandemic isolation.

Sentiment soured, however, after Federal Reserve policymakers Raphael Bostic and Neel Kashkari pointed to rates going higher than forecast and for an extended period.

The eurozone annual inflation rate meanwhile fell by less than expected to 8.5 per cent in February, the EU's statistics agency said on Thursday.

"Stock market investors found no reason to cheer..., which meant that the likes of the (Frankfurt) DAX showed an immediate negative reaction to the numbers," noted City Index analyst Fawad Razaqzada.

In the United States, Atlanta Fed chief Bostic warned American interest rates could go well above five per cent, adding that once inflation had come down to the bank's two per cent target officials should not loosen policy too soon.

"History teaches that if we ease up on inflation before it is thoroughly subdued, it can flare anew," he wrote. "That happened with disastrous results in the 1970s."

And Minneapolis boss Kashkari said he was still "open-minded" about backing a 50-basis-point hike at the next policy meeting, double the most recent increase.

"We're not yet seeing much of a sign of our interest-rate increases slowing down the services sector of the economy and that is concerning to me," he said.

We're not yet seeing much of a sign of our interest-rate increases slowing down the services sector of the economy and that is concerning to me- Atlanta Fed chief Raphael Bostic

Talk of more aggressive US rate hikes boosted the dollar on Thursday.

There is a growing expectation rates would top out around 5.5 per cent, though some commentators are tipping six per cent, from the current 4.5 to 4.75 per cent.

The comments came as the yield on 10-year US Treasuries – a proxy for future rates – broke four per cent for the first time since November.