NEW YORK : World equities fell on Thursday to an 18-month-low, with markets dogged by fears high inflation would persist and force central banks to keep tightening monetary policy.
In the United States, stocks ended a whipsaw session slightly lower, as investors juggled fears of nagging inflation with signs it could be peaking. The S&P 500 came within striking distance of confirming a bear market since swooning from its all-time high reached in January.
In Europe, economic worries were exacerbated by a German warning that Russia was now using energy supplies as a "weapon."
Europe's continent-wide STOXX 600 index was down 0.75 per cent. MSCI's gauge of stocks across the globe was down 0.69 per cent, as of 5:09 p.m. ET (2109 GMT).
That flagship global index is nearly 20 per cent lower for the year.
The Dow Jones Industrial Average fell 103.81 points, or 0.33 per cent, to 31,730.3, the S&P 500 lost 5.1 points, or 0.13 per cent, to 3,930.08 and the Nasdaq Composite added 6.73 points, or 0.06 per cent, to 11,370.96.
The dollar climbed to a 20-year high, as global economic fears boosted its safe-haven appeal.
The dollar index rose 0.711 per cent after touching 104.92, its highest since Dec. 12, 2002. The euro was down 0.02 per cent to $1.0377 after falling to 1.0352, its lowest since Jan. 3, 2017.
Oil prices settled mixed on supply fears due to the pending European Union ban on Russian oil. Brent crude fell 6 cents to settle at $107.45 a barrel. WTI crude rose 42 cents, or 0.4 per cent, to settle at $106.13.
The U.S. Labor Department said the producer price index for final demand rose 0.5 per cent in April, slower than the 1.6 per cent surge in March, as rising costs of energy products moderated.
Consumer price gains slowed to an 8.3 per cent rise in April year-on-year from the 8.5 per cent pace of March, but exceeded the 8.1 per cent economists had forecasts.
"It has been a punishing time for financial assets since the Fed raised rates ... and the subsequent strong US jobs market, and CPI data have reinforced concerns over the extent of the task facing the Fed," analysts at ANZ bank wrote.
Graphic - World stocks suffer worst start to a year in recent record : https://fingfx.thomsonreuters.com/gfx/mkt/lgvdwgdgopo/Pastedper cent20imageper cent201652345427073.png
SELL IN MAY
The main pan-Asia Pacific indexes closed down 2.5 per cent at a 22-month low overnight. Japan's Nikkei fell 1.8. Emerging market stocks lost 2.28 per cent.
U.S. Treasury yields slid. The yield on 10-year Treasury notes US10YT=RR was down 7.1 basis points to 2.843 per cent after the benchmark U.S. government bond fell to a morning low of 2.816 per cent.
Germany's 10-year yield, the benchmark for Europe, fell as much as 15 bps to 0.85 per cent, its lowest in nearly two weeks.
The rout continued in cryptocurrency markets, with the collapse of the so-called stablecoin TerraUSD; selling in bitcoin and a 15 per cent slump in the next-biggest-crypto, ether.nL3N2X337U]
Tether, currently the world's largest stablecoin by market cap with a value directly tied to the dollar, broke below its so-called U.S. dollar "peg." The global sell-off has now wiped more than $1 trillion off crypto markets. Around 35 per cent of that loss has come this week.
"The collapse of the peg in TerraUSD has had some nasty and predictable spillovers. We have seen broad liquidation in BTC, ETH and most ALT coins," said Richard Usher, head of OTC trading at BCB Group, referring to other cryptocurrencies.
Precious metals also dropped. Spot gold fell 1.7 per cent to $1,821.52 an ounce. U.S. gold futures fell 1.64 per cent to $1,823.80 an ounce.
Benchmark copper on the London Metal Exchange (LME) was down 3.6 per cent at $9,000 a ton in official trading after falling as low as $8,938. Prices are down 17 per cent from a record high of $10,845 reached in March.