London (AFP) - Stock markets slumped Thursday after Wall Street suffered one of its worst batterings in two years as traders recoiled at the prospect of recession.
Downcast earnings reports from retailers have exacerbated worries about consumer resilience in the face of decades-high inflation.
"A red wall of worry has built up across financial markets with investors increasingly nervous that economies are set to career into recession," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
Europe's major stock markets were down more than two percent approaching the half-way stage after leading Asian indices closed down by a similar amount.
Among the biggest losers were tech giants after Chinese giant Tencent reported lacklustre profits, fuelling wider concerns over China's economic outlook.
Tencent shares plunged more than eight percent in early trading before paring losses slightly, a day after it posted its slowest revenue gain since going public in 2004.
Among other tech titans, Alibaba dropped more than six percent.
"Sentiment...is highly negative as traders and investors are largely concerned about an economic downturn and soaring inflation," said AvaTrade analyst Naeem Aslam.
On Wall Street Wednesday, all three major US indices dived, with the Dow sinking more than 1,150 points or 3.6 percent.
The Nasdaq plunged 4.7 percent by the close.
North American-focused big-box retailer Target plunged about 25 percent in value after group earnings missed expectations despite higher sales.
The company reported higher operating costs in results that echoed those of bigger rival Walmart.
The retailers said consumers were avoiding discretionary purchases as prices for food, gasoline and other household staples jump.
"The big falls in shares...highlights the damage inflation is inflicting," said Fawad Razaqzada at City Index.
"Consumers are getting squeezed...and if they now start to cut back on spending then retailers could suffer even further."
In some of his most hawkish remarks to date, Federal Reserve Chair Jerome Powell this week said the US central bank would raise interest rates until there is "clear and convincing" evidence that inflation is in retreat.
But higher borrowing costs increases debt, heaping further pressure on consumers and businesses.
The United States is facing the fastest inflation in four decades, as is Britain, causing the Bank of England to also raise interest rates.
Key figures at around 1100 GMT
London - FTSE 100: DOWN 2.4 percent at 7,260.54 points
Frankfurt - DAX: DOWN 1.9 percent at 13,736.78
Paris - CAC 40: DOWN 2.1 percent at 6,220.91
EURO STOXX 50: DOWN 2.3 percent at 3,606.19
Hong Kong - Hang Seng Index: DOWN 2.5 percent at 20,120.60 (close)
Shanghai - Composite: UP 0.4 percent at 3,096.96 (close)
Tokyo - Nikkei 225: DOWN 1.9 percent at 26,402.84 (close)
New York - Dow: DOWN 3.6 percent at 31,490.07 (close)
Brent North Sea crude: DOWN 1.3 percent at $107.68 per barrel
West Texas Intermediate: DOWN 1.7 percent at $107.8 per barrel
Euro/dollar: UP at $1.0530 from $1.0479
Pound/dollar: UP at $1.2430 from $1.2346
Euro/pound: DOWN at 84.73 pence from 84.88 pence
Dollar/yen: DOWN at 127.72 yen from 128.58
