London (AFP) - Stock markets mostly retreated Thursday as fresh evidence of runaway global inflation ramped up expectations of more aggressive interest rate hikes by central banks, while disappointing earnings revived recession fears.
That sent the dollar rising, helping push oil prices sharply lower and the euro briefly below $1.00.
Eurozone inflation will end the year at 7.6 percent, much higher than previously forecast, the EU said Thursday.
The prediction comes one day after US inflation came in at a blistering 9.1 percent last month, the highest level for more than 40 years, as the Ukraine war fuelled energy prices.
US producer prices rose by a faster-than-expected 1.1 percent in June from the previous month, data released Thursday showed.
Market watchers are now wondering whether the Federal Reserve could hike US borrowing costs by a full percentage point at a scheduled policy meeting this month.
One Fed policymaker said publicly Thursday he would support such a hike if economic data comes in stronger than expected.
The central bank in June unveiled its first 75 basis-point rise in three decades and is one of dozens to hike rates.
Singapore and the Philippines became the latest to tighten policy Thursday, a day after Canada, New Zealand, Chile and South Korea announced hikes.
The US inflation reading followed last week's news of a surprise spike in jobs creation, which suggested the world's top economy was withstanding the rate hikes, giving the Fed more room for further increases.
"Stubbornly high inflation increases the risk that the (Fed) continues to hike aggressively and triggers a recession," said Kristina Clifton at Commonwealth Bank of Australia, adding that belief was picking up momentum on trading floors.
The European Commission on Thursday slashed growth forecasts for the eurozone, saying the consequences from the war in Ukraine were continuing to destabilise the economy.
Growing fears of a global recession sent oil prices tumbling, with the main US contract, WTI, losing more than five percent at one point.
The Fed's drive to tighten monetary policy continues to send the dollar higher, and Wednesday it finally rose above parity with the euro for the first time since late 2002, before falling again.
The euro fell back below parity once again shortly after US markets opened, before bouncing back.
Europe's main stock indices finished more than one percent lower, with Milan slumping more than three percent on fears political tensions within Prime Minister Mario Draghi's coalition government could bring it crashing down and spark snap elections.
On Wall Street, stocks tumbled with the Dow falling two percent at one point as data showed wholesale price rises accelerating and bank earnings disappointing as the US corporate results reporting season gets underway.
JPMorgan Chase reported a drop in second-quarter profits, reflecting the impact of a weakening macroeconomic outlook that led it to set aside funds in case of bad loans.
Macroeconomic headwinds including inflation "are very likely to have negative consequences on the global economy sometime down the road", the bank's CEO Jamie Dimon said.
"Traders were in for a rude awakening today, as Jamie Dimon brought home the reality of how earnings season is likely to play out," said Joshua Mahony, senior market analyst at online trading platform IG.
"Despite being well aware of the ongoing risks, markets appeared shocked as the JP Morgan chief laid out the risks posed by inflation, monetary tightening, and Russian influences on food and energy flows," he added.
Key figures at around 1530 GMT
New York - Dow: DOWN 1.4 percent at 30,345.26 points
EURO STOXX 50: DOWN 1.7 percent at 3,396.61
London - FTSE 100: DOWN 1.6 percent at 7,030.81 (close)
Frankfurt - DAX: DOWN 1.9 percent at 12,519.66 (close)
Paris - CAC 40: DOWN 1.4 percent at 5,915.41 (close)
Tokyo - Nikkei 225: UP 0.6 percent at 26,643.39 (close)
Hong Kong - Hang Seng Index: DOWN 0.2 percent at 20,751.21 (close)
Shanghai - Composite: DOWN 0.1 percent at 3,281.74 (close)
Euro/dollar: DOWN at $1.0012 from $1.0061 Wednesday
Pound/dollar: DOWN at $1.1806 from $1.1893
Euro/pound: UP at 84.81 pence from 84.59 pence
Dollar/yen: UP at 139.08 yen from 137.36 yen
West Texas Intermediate: DOWN 3.0 percent at $93.44 per barrel
Brent North Sea crude: DOWN 2.6 percent at $97.02 per barrel
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