LONDON: Europe's stock markets rebounded Friday on bargain-hunting and the euro stabilised after striking a two-year dollar low, as dealers dwelled once more on the European Central Bank's interest rate outlook.

Frankfurt stocks won 0.3 percent and Paris added 0.4 percent, while London added 0.5 percent in value. The euro held steady at $1.1143.

"Stocks in Europe are a little higher today in the wake of the major sell-off yesterday," said CMC Markets analyst David Madden.

"Ahead of the ECB meeting, traders were expecting a dovish update, and when a mixed report was released, it triggered a wave of selling, and today we are seeing some bargain hunting."

The European single currency had briefly sunk on Thursday to $1.1102 -- the lowest level since May 2017 -- after the ECB signalled it could undertake new stimulus measures and cut rates to boost flagging growth and inflation in Europe.

Yet the bank, headed by President Mario Draghi, had left some traders feeling disappointed by the lack of any immediate action.

"It seems the heat is not the only thing that's taken it out of investors on the final day of the week as markets show signs of fatigue following a busy few days," said Oanda analyst Craig Erlam.

"The killer blow came from Mario Draghi on Thursday who wasn't his usual dovish self -- or more accurately, (he) failed to live up to the high level of expectation that the market has set."

"I fear this is going to be a recurring theme as central banks try to appease markets while at the same time trying not to be pushed into easing at a faster rate than they are comfortable with."

- Asia chases US lower -

Elsewhere on Friday, Asian markets tumbled after disappointing US earnings and a bearish outlook on hopes for a Federal Reserve rate cut weighed on Wall Street overnight.

Tesla and American Airlines both suffered bruising declines after posting quarterly results, while Amazon reported a slowdown in earnings growth as it ramped up one-day delivery operations.

American stocks had been bolstered in recent weeks by expectations that the Federal Reserve will cut interest rates next week.

But strong American economic data, including Thursday's report showing an increase in durable goods sales in June, has investors fearing a less dovish Fed announcement. —AFP