ShareLondon: Stock markets plunged deeper into the red on Friday after data showed that US inflation soared to highest level in 40 years in May, outpacing analysts' expectations.
In Europe, all of the major stock indices ended the week sharply lower.
Paris's blue-chip CAC 40 lost 2.7 percent on Friday, Frankfurt's DAX index was down 3.1 percent, Milan's FTSE MIB shed 5.1 percent, Madrid's IBEX tumbled 3.7 percent and London's FTSE dropped by 2.1 percent.
On Wall Street, stocks also were deep in negative territory after US government data showed inflation reached 8.6 percent in May, the steepest rise in consumer prices since December 1981, on the back of surging energy and food prices.
"US CPI for May has come in stronger than expected," said Stephen Innes of SPI Asset Management. "Inflation is back on the highs; critically, it's across the board."
The data had been eagerly anticipated as investors hungrily look for clues as to the direction of US interest rates at next week's meeting of the Federal Reserve.
"Today's release of US CPI underscores the need for tighter monetary policy," said Fawad Razaqzada at Forex.com.
"As the Fed and others have admitted the need for 'more forceful' monetary tightening to address surging inflation around the world, this should keep the Nasdaq and other risk assets under pressure and support the US dollar against weaker currencies and gold," he said.
Inflation is soaring across the world, prompting the European Central Bank to finally join the Fed in tightening its monetary policy as it announced on Thursday that it would raise rates next month.
Economists warn that surging inflation, driven by rocketing energy prices, could push top economies into recession.
Adding to the unease was news that officials in China had once again locked down millions of people for Covid testing owing to another flare-up in cases, dealing a blow to hopes for an economic reopening.
"Warning signs about the economy are emerging as weekly (US) jobless claims are starting to rise, China's Covid situation will prove troublesome for supply chains over the next couple of quarters, and as inflationary pressures broaden and show no sign of easing," said Edward Moya, analyst at OANDA trading group.
"It seems reductions in global growth forecasts will become a steady theme over the next few months and that should complicate how much more tightening we see from central banks," he said.
The World Bank and Organisation for Economic Co-operation and Development both lowered their global economic growth forecasts for this year earlier in the week.
- Key figures at around 1535 GMT -
New York - Dow: DOWN 2.5 percent at 31,476.37 points
London - FTSE 100: DOWN 2.1 percent at 7,317.52 (close)
Frankfurt - DAX: DOWN 3.1 percent at 13,761.83 (close)
Paris - CAC 40: DOWN 2.7 percent at 6,187.23 (close)
EURO STOXX 50: DOWN 3.4 percent at 3,599.20
Tokyo - Nikkei 225: DOWN 1.5 percent at 27,824.29 (close)
Hong Kong - Hang Seng Index: DOWN 0.3 percent at 21,806.18 (close)
Shanghai - Composite: UP 1.4 percent at 3,284.83 (close)
Euro/dollar: DOWN at $1.0516 from $1.0620 late Thursday
Euro/pound: UP at 85.37 pence from 84.98 pence
Dollar/yen: DOWN at 134.15 yen from 134.40 yen
Pound/dollar: DOWN at $1.2317 from $1.2495
Brent North Sea crude: DOWN 1.3 percent at $121.48 per barrel
West Texas Intermediate: DOWN 1.2 percent at $120.04 per barrel
