New York (AFP) - World stocks sank Monday and the dollar rallied on concern the Federal Reserve will stick to its interest rate-hiking plans to combat steep inflation.
Wall Street equities tumbled, with all three major US indices ending with losses of about two percent or more, and the tech-rich Nasdaq Composite sinking 2.6 percent.
Eurozone equities also tanked as spiking natural gas prices sparked fears that winter energy shortages could cause recession, which helped push the euro down to a 20-year low, under parity against the greenback.
Meanwhile, oil slumped on speculation over an Iran nuclear deal that could ease a supply crunch caused by producer Russia's invasion of Ukraine.
All eyes are on this week's central banking symposium in Jackson Hole, Wyoming, where Fed Chair Jerome Powell will deliver a speech that is expected to repeat the message that policymakers are not done raising rates yet.
"This week is going to be an opportunity for the Federal Reserve to...send a very clear message to markets.And I think that message will be one that is still focused on inflation," said Andy Kapyrin of Regent Atlantic.
"That creates risk for the market, particularly the higher valuation tech stocks" such as those on the Nasdaq, he told AFP.
Easing price pressures and signs of economic slowdown had raised hopes Fed policymakers would pause and possibly even cut rates next year after two successive, 75-basis-point hikes, helping equities rally globally in recent weeks.
But that optimism has slowly been eroded in recent weeks as Fed officials, including Powell, have warned that the battle against inflation was far from won, particularly as the jobs market remained resilient.
The recent rally in equities "was probably a little premature," said Ross Mayfield at Baird.
"Really, nothing in the macro story had changed all that much.The Fed was still signaling rate hikes," he told AFP.
'Recessionary risk'
The euro has come under additional pressure after Russia's Gazprom said late Friday that the Nord Stream pipeline would be closed for maintenance at the end of the month, cutting Europe's daily gas deliveries.
As a result, Europe's Dutch TTF Gas Futures contract soared on Monday close to 300 euros per megawatt hour -- not far from record struck after Moscow launched its assault on Ukraine -- due to worries that Russia will not resume supplies afterwards.
In Europe, London shed 0.2 percent, but both Paris sank 1.8 percent and Frankfurt 2.3 percent on spiking as prices.
Surging energy prices have this year driven inflation to 40-year peaks in nations including Britain and the United States, in turn prompting tighter monetary policy.
US banking group Citi has forecast that UK inflation would peak at 18.6 percent next January on the back of rocketing domestic energy prices.
Asian equity markets mostly fell, although Shanghai stocks rose after China's central bank cut prime loan rates as it tries to bolster the world's second-biggest economy, which has been ravaged by lockdowns as part of a zero-Covid strategy.
The prospect of more US hikes also sent the dollar rallying against the yen, and it is nearing the 140-yen mark for the first time in 24 years.
Key figures at around 2030 GMT
New York - Dow: DOWN 1.9 percent at 33,063.61 points (close)
New York - S&P 500: DOWN 2.1 percent at 4,137.99 (close)
New York - Nasdaq: DOWN 2.6 percent at 12,381.57 (close)
EURO STOXX 50: DOWN 1.9 percent at 3,658.22 (close)
London - FTSE 100: DOWN 0.2 percent at 7,533.79 (close)
Frankfurt - DAX: DOWN 2.3 percent at 13,230.57 (close)
Paris - CAC 40: DOWN 1.8 percent at 6,378.74 (close)
Tokyo - Nikkei 225: DOWN 0.5 percent at 28,794.50 (close)
Hong Kong - Hang Seng Index: DOWN 0.6 percent at 19,656.98 (close)
Shanghai - Composite: UP 0.6 percent at 3,277.79 (close)
Euro/dollar: DOWN at $0.9941 from $1.0037 Friday
Pound/dollar: DOWN at $1.1763 from $1.1829
Euro/pound: DOWN at 84.51 pence from 84.86 pence
Dollar/yen: UP at 137.48 yen from 136.97 yen
West Texas Intermediate: DOWN 0.6 percent at $90.23 per barrel
Brent North Sea crude: DOWN 0.2 percent at $96.48
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