On Thursday a bond market sell-off reached stocks, triggering the worst one-day drop in European equities since September, and the biggest fall for the US S&P 500 in over a month.
Asian markets followed suit on Friday, with Tokyo's Topix off 1 per cent by late morning, heading for its worst day in more than two months. In Hong Kong the Hang Seng was also 1 per cent lower while Sydney's ASX200 shed 1.6 per cent.
Fears of tighter monetary policy have weakened the dollar and pushed yields on 10-year US Treasuries up 12 basis points this week to 2.27 per cent - hovering near a one-month high.
The turmoil also pushed the pound above $1.30 against the dollar for only the second time since September after hawkish comments by the BoE this week surprised investors more focused on the risks from Brexit.
The main driver however has been comments by ECB chief Mario Draghi earlier this week that the eurozone was headed towards "reflation", remarks that convinced some traders Mr Draghi was planning to "taper" his €60bn-per-month bond-buying programme.
Although the ECB sought to quell these fears, investors still fret that the end of ultra-loose global monetary policy, begun during the financial crisis to halt the "great recession", is now looming.
While the US central bank has been gingerly raising interest rates since late 2015, global bond yields have remained low due to the ECB and BoJ's aggressive stimulus, and investors have long feared that if one or both of those central banks changed course it could cause a repeat of the 2013 turbulence.
"We're seeing a mini taper tantrum," said John Vail, chief global strategist at Nikko Asset Management. "Although I'd emphasise the 'mini', it feels like a major change, as low eurozone bond yields were also pinning down US yields."
The Eurofirst 300 index fell by 1.4 per cent to its lowest level since April 24, while the US S&P 500 slipped 0.9 per cent, its drop contained thanks to moderate gains for energy and financial stocks.
The European bond market meanwhile suffered a rout. The 10-year bond yields of Germany, France and the UK all climbed, with British gilts rising the furthest; Mark Carney, the Bank of England governor, has signalled this week that he, too, is preparing to raise rates.
The pound reached $1.3025 in Asian hours. It last traded consistently above $1.30 nine months ago.
While the ECB downplayed Mr Draghi's Tuesday comments, they were followed by a series of hawkish speeches from the BoE and the Fed. The Bank of Canada's Stephen Poloz has also hinted that he might raise rates, reinforcing the sense of a looming inflection point.
"It almost feels co-ordinated," said Jim Caron, a bond fund manager at Morgan Stanley Investment Management. "Markets are paying attention to what the central bankers are saying."
Rate rise speculation, helped by signs of a tightening labour market, also lifted Australian bond yields and pushed the Aussie to a three-month high at $0.7696 against its US counterpart.
"Once the Reserve Bank of Australia sees clear evidence of a lift in wages growth, we expect that a [rate] hike will not be too far away," said Paul Bloxham, HSBC's chief Australia economist.
Australian 10-year yields reached a six-week high at 2.5854 per cent, up 8bp.
Japan's 10-year bond yield edged up 2bp to 0.07 per cent but reaction was subdued since the prospect of tightening monetary policy elsewhere would leave the Bank of Japan the global flag bearer for ultra-loose monetary policy.
Copyright The Financial Times Limited 2017
