From Europe to Asia, shares fell, and government bond yields rose Wednesday as oil prices hit their highest in seven years, fuelling concerns about rising inflation.
The Euro STOXX 600 fell 1.8%, denting gains made on its best day in 11 weeks on Tuesday, with tech stocks down more than 2% and Germany leading losses at 1.6%.
The mood was set to hit Wall Street, where S&P 500 Futures gauges pointed to losses of 0.9%-1.1%.
Weighing on equity markets were oil prices hitting their highest since Nov. 2014, with investors anxious that spiraling energy costs could force central banks to raise rates more quickly to combat rising inflation.
US crude rose 0.4% to $79.22 a barrel, with Brent crude also climbing 0.4% to $82.87, close to a three-year top hit in the previous session.
Concerns About Energy
Concerns about energy supply and a decision on Monday by producers to stick to a planned output increase rather than raising it further were behind the increases.
Inflation angst drove a sell-off in longer-dated US Treasuries, eurozone benchmark debt, and supported the dollar. Mike Bell, a global market strategist at JP Morgan Asset Management, said,
"Higher oil - and commodity prices in general in terms of gas and oil - are feeding through into higher bond yields because it has an inflationary implication,
The market is looking at that and thinking, 'is there a scenario in which inflation that everyone has said might be transitory, being a little bit more persistent?'"
Dollar Up, Kiwi Down
The euro was pinned below $1.16 and was last down 0.2%, scarcely higher than the 14-month low it struck last week.
Meanwhile, the dollar edged higher against a basket of other major currencies, supported by rising yields, and headed towards a one-year high hit last month. The greenback rose 0.3% to 94.0232, gaining momentum during European hours.
The New Zealand dollar extended losses as US yields rose after barely budging on the Reserve Bank of New Zealand (RBNZ) lifting its official cash rate for the first time in seven years.
The kiwi was last 0.9% at $0.6896. The euro was pinned below $1.16 and was last down 0.2%, scarcely higher than the 14-month low it struck last week.