New York: Equity markets across the world tumbled Tuesday as fears of spiking inflation set off a wave of selling across most bourses.
London stocks dived over 3.0 per cent at one point before recovering some ground to close 2.5 per cent lower.
Paris fell 1.9 per cent and Frankfurt 1.8 per cent.
Wall Street stocks also retreated, although the Nasdaq finished almost flat following a wave of bargain-hunting.
"European stock markets have taken a beating today over concerns about rising inflation expectations," said Michael Hewson, chief market analyst at CMC Markets UK.
Traders are fearful that surging inflation could force the world's central banks to wind back ultra-loose monetary policies earlier than forecast and damage the post-Covid recovery.
MSCI's broadest index of Asia-Pacific shares outside Japan faltered 0.5%, after tumbling 1.6% on Tuesday for its biggest daily percentage drop since March 24.
"There isn't a clear catalyst behind this purge," said Marios Hadjikyriacos, investment analyst for XM.
"It seems to be a combination of inflation fears making a comeback and some market participants moving higher along the value spectrum, cutting their exposure to anything with a stretched valuation." At 682 points, the regional index is not too far from a record high of 745.89 touched in February and is still up 3% this year so far, on top of a 19% jump in 2020 and a near 16% rise in 2019.
Shares in China opened in the red, with the blue-chip index off 0.2%.
Earlier, Tokyo and Taipei each dropped more than 3 per cent, while Hong Kong was off 2 per cent.
Data showed a 6.8 per cent rise in Chinese factory gate prices last month, the biggest jump in almost four years.
That is due to a rally in commodity prices - particularly widely used copper and iron ore - which has markets concerned that costs will spiral.
"Investors do appear to be freaking out a little bit over the recent sharp rise in commodity prices that we've seen in the past few weeks," said Hewson.
Rising Treasury yields
The yield on the 10-year US Treasury rose back above 1.6 per cent, a move typically reflecting concerns about rising prices.
Analyst Patrick O'Hare at Briefing.com said markets were "wrestling with the general sentiment that most stocks are over-extended and due for a pullback, if not an actual correction."
US stock indices have soared to new heights on the prospects of a rebound in the economy, but there are concerns that share prices may have risen too far.
"This is a cutting of the fat," O'Hare said. "It's also a reminder that valuation always matters."
All eyes are now on the release this week of crucial data on US retail sales and consumer prices, with expectations for a sharp rise as the world's top economy reopens and vaccines allow people to return to normal life.
"Inflation is what keeps investors up at night," said Swissquote analyst Ipek Ozkardeskaya.
"And the latest Chinese figures did not help soothing investors' nerves," she added.