* Pressure remains on bitcoin, cryptos after crash * Europe helps world stocks wobble higher * Dollar stalls after tapering talk lift, Wall Street seen subdued * Commodities drop as China vows to crackdown on speculation * Colombia stripped of prized investment grade status by S&P * Graphic: Global asset performance tmsnrt.rs/2yaDPgn * Graphic: World FX rates tmsnrt.rs/2egbfVh LONDON, May 20 (Reuters) - Europe’s stock markets saw a tentative rebound on Thursday and bitcoin bounced more than 12% after one of its spectacular smashes, though tapering talk from the U.S. Federal Reserve kept bond markets under pressure. After Wednesday’s drama had seen the main cryptocurrencies shed almost a third of their value at one point and the STOXX 600 suffer one of its worst sell-offs of the year, traders were now watching a recovery unfold. Bitcoin was up 12.5% at over $41,000 having nearly slid though $30,000 on Wednesday and been almost at $65,000 just over a month ago. The next biggest cryptocurrency ethereum, which had fared even worse on Wednesday, leapt 15%. Wall Street was expected to open subdued again but Europe’s stocks clawed back 0.6% helped by telecoms earnings and talk that Italian microchip heavyweight STMicroelectronics was eyeing up a Norwegian rival. Commodities also steadied after a 5% overnight tumble in iron ore and coking coal caused by China’s cabinet announcing that it would take steps to curb “unreasonable” prices and behaviours that bid up costs. Referring to drops in the most pumped-up asset classes, investment firm GMO’s head of asset allocation, Ben Inker, said: “Right now we are seeing the speculative bubble in the growth stocks seem to be deflating... but is this the first innings of a broad deflation of equity markets?” Markets were now walking a tightrope between strong growth and inflation, he added. Minutes from the last U.S. Federal Reserve meeting published on Wednesday showed “a number” of officials thought that if the recovery holds up, it might be appropriate to “begin discussing a plan for adjusting the pace of asset purchases”. “This is very much the market view, really,” ING economist Rob Carnell said on the phone from Singapore, with traders expecting strong hints over summer that the “taper”, as winding down support is known, is coming later in the year. The yield on 10-year U.S. Treasuries had risen 4.1 basis points overnight to as high as 1.6830%. They were last back a touch at 1.6557% though Europe’s equivalent benchmark, the 10-year German Bund, were still up a touch at a still negative -0.097%. The dollar settled after scraping itself off a four-month low to hover around $1.2181 per euro. The greenback had also pushed through its 20-day moving average against the yen and Aussie and New Zealand dollars before taking its breather. It last bought 108.95 yen and the dollar index was last at 90.009. On Wall Street overnight the S&P 500 closed 0.3% lower and the Nasdaq was flat, something of a recovery after each dropped more than 1.6% during the session. Futures markets were pointed to further modest falls later though. CRYPTO KNIGHTS The trigger for Wednesday’s sharp falls in bitcoin, ether and other cryptocurrencies appeared to be China’s move on Tuesday to reinforce strict curbs on crypto trading by barring financial institutions from providing transaction services. Traders said the huge run-up in prices for the asset class in recent months meant that gravity also probably played a role, as well as Tesla boss Elon Musk’s apparent cooling on bitcoin over the amount of energy consumed in processing transactions. Musk had tweeted the ‘diamond hands’ emojis on Wednesday that traders on social media use as a sign they won’t sell. Outages at several major trading platforms during the maelstrom, which also set ether tumbling nearly 50%, also did little to inspire confidence. “It’s not just crypto – although that is the poster child of this movement – but SPACs, recent IPOs, ARK Innovation and Tesla, to name a few, have all lost their bid,” said Chris Weston, head of research at brokerage Pepperstone in Melbourne. SPACs - special purpose vehicles set up and listed to buy up other firms - enjoyed huge growth last year, as did the ARK innovation fund which focuses on tech companies. “For me, the overriding factor is liquidity and the timing of lower liquidity and that is having huge ramifications - we are debating, not just a slower pace of central bank asset purchases (QE), but when QE comes to an end.” Oil prices dribbled lower while in emerging markets, Colombia was digesting the loss of its S&P Global investment grade status. It has had the coveted IG badge for nearly a decade and is likely to keep the pressure on its currency which is down around 7% this year. “It is highly likely that Fitch will choose to join them once the fate of the (country’s) fiscal package is clarified, probably in 3Q,” JPMorgan’s Katherine Marney wrote in a note to clients. Additional reporting by Tom Westbrook in Singapore Editing by Peter Graff, William Maclean Our Standards: The Thomson Reuters Trust Principles.