Morning Chronicle - Major markets tumble on heightened recession fears

The dollar, however, gained versus major rivals, benefiting from its status as a haven investment and expectations of aggressive interest-rate hiking from the Federal Reserve.

Bond yields also rose, with 10-year US Treasuries above 3.3 percent and Italy's 10-year debt breaking four percent for the first time in more than eight years.

The US currency struck a 24-year peak against the yen before retreating, while it broke above 78 Indian rupees for the first time. It jumped one percent versus the pound.

"The hangover from a higher-than-expected US inflation reading is continuing to cause scissoring pain throughout the markets, as it extinguishes the hope the US Federal Reserve might be able to take its foot off the pedal on interest rate rises," noted AJ Bell investment director Russ Mould.

US and European stocks had already tumbled Friday following the inflation data, with Asia following suit Monday.

European stock markets extended pre-weekend losses with drops of over two percent, while London took a hit also from data showing the UK economy contracted in April for a second month in a row.

Wall Street also tumbled, with the blue-chip Dow down around 2.3 percent in late morning trading and the tech-heavy Nasdaq falling nearly four percent.

World oil prices, whose surge has contributed massively to soaring inflation, slid around 1.5 percent as the high cost of living increased recession expectations.

The possibility of more Covid restrictions in China's biggest cities also weighed on crude futures as the country is a major oil consumer.

Fresh coronavirus outbreaks in Shanghai and Beijing have seen authorities reimpose containment measures.

"This has fed into a narrative that the global economy will slow even further at a time when prices are showing little sign of doing the same," said market analyst Michael Hewson at CMC Markets UK.

- Bitcoin crash -

Bitcoin tumbled to an 18-month low of under $23,000 as investors shunned risky assets in the face of the vicious global markets selloff.

The unit took a heavy knock also from news that cryptocurrency lending platform Celsius Network paused withdrawals, citing volatile conditions.

"It is not very surprising to see such a strong downturn as we have noticed an increased correlation over the last few years between traditional stocks, which have also tanked recently, and the cryptocurrency market," noted XTB chief market analyst Walid Koudmani.

Patrick O'Hare, analyst at Briefing.com, said the carnage in the crypto market "is compounding worries about growth prospects due to the reduced wealth effect that also incorporates falling stock and bond prices."

Investors were left surprised Friday when data showed US inflation jumped to 8.6 percent in May, the fastest pace in more than 40 years, as the Ukraine war further fuelled energy and food prices.

The reading has led to fervent speculation that the Fed will now be contemplating a single interest-rate lift of 75 basis points at its meeting this week.

With the central bank forced to be more aggressive, there is heightened concern that the US economy could be sent into recession next year.

"The market is now thinking much more about the Fed driving rates sharply higher to get on top of inflation and then having to cut back as growth drops," said SPI Asset Management's Stephen Innes.

- Key figures at around 1530 GMT -

New York - Dow: DOWN 2.3 percent at 30,663.44 points

EURO STOXX 50: DOWN 1.9 percent at 3,444.93

London - FTSE 100: DOWN 1.5 percent at 7,205.81 (close)

Frankfurt - DAX: DOWN 2.4 percent at 13,427.03 (close)

Paris - CAC 40: DOWN 2.7 percent at 6,022.32 (close)

Tokyo - Nikkei 225: DOWN 3.0 percent at 26,987.44 (close)

Hong Kong - Hang Seng Index: DOWN 3.4 percent at 21,067.58 (close)

Shanghai - Composite: DOWN 0.9 percent at 3,255.55 (close)

Dollar/yen: DOWN at 134.13 yen from 134.42 yen late Friday

Euro/dollar: DOWN at $1.0433 from $1.0526

Pound/dollar: DOWN at $1.2161 from $1.2309

Euro/pound: UP at 85.78 pence from 85.39 pence

Brent North Sea crude: DOWN 1.5 percent at $120.13 per barrel

West Texas Intermediate: DOWN 1.6 percent at $118.72 per barrel

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R.Bailey--MC-UK