London (AFP) - Stock markets retreated on Thursday as the US Federal Reserve and several of Europe's central banks unleashed more hefty interest rate hikes that aim to stomp inflation but raise fears of recession.
On Wall Street, the Dow Jones Industrial Average was off 0.4 percent in late morning trading, with the broader S&P 500 and tech-heavy Nasdaq Composite down further.
European markets finished lower, with London's FTSE 100 down 1.1 percent after the Bank of England raised its rate again to combat inflation and signalled that the UK entered recession in the current quarter.
The BoE's 0.5-percentage-point hike was smaller than the US Federal Reserve's third consecutive 0.75-point increase.
"Today has seen another bout of downside for stock markets throughout Europe and the US, with geopolitical and economic concerns providing a drag on risk assets once again," Joshua Mahony, senior market analyst at online trading platform IG.
"On a week dominated by central banks, it was always going to be difficult to envisage a scenario where traders emerge with a positive outlook," he added.
The world's major central banks are rushing to ramp up rates to dampen red-hot global consumer prices, but traders fear rising borrowing costs will herald recession.
While the Fed's 0.75-percentage-point rise was widely expected, there was some surprise at the central bank's forecast that borrowing costs would likely be held above four percent throughout next year.
Fed chairman Jerome Powell reiterated his determination to focus on bringing down inflation -- which is at a four-decade high -- and accepted that the campaign would hit Americans hard.
"What hit home for market participants yesterday is that the Fed, steered by Fed Chair Powell, really means business now in restoring price stability, and if that means a hard landing for the economy, so be it," said Briefing.com analyst Patrick O'Hare.
Japan bucks the trend
Switzerland and Norway also sprang hefty interest rate hikes on Thursday, two days after a super-sized increase in Sweden.
In Asia, Indonesia and the Philippines also tightened monetary policy but the Bank of Japan bucked the global trend as it left its status quo in place.
The dollar pared back gains after rising against other major currencies following the Fed's rate decision.
The British pound briefly dived to a new 37-year low at $1.1212 but recovered after the BoE announcement.
The euro touched a new 20-year dollar low of $0.9809.
The yen, which has been plummeting due to the policy gap between the US and Japanese central banks, clawed back against the dollar after Japan's finance ministry said it intervened in the currency market.
Oil prices extended recent gains after Russian President Vladimir Putin announced a partial mobilisation of the Russian army and made a veiled threat to use nuclear weapons against the West.
Key figures at around 1530 GMT
New York - Dow: DOWN 0.4 percent at 30,055.94 points
EURO STOXX 50: DOWN 1.9 percent at 3,427.14
London - FTSE 100: DOWN 1.1 percent at 7,159.52 (close)
Frankfurt - DAX: DOWN 1.8 percent at 12,531.63 (close)
Paris - CAC 40: DOWN 1.9 percent at 5,918.50 (close)
Tokyo - Nikkei 225: DOWN 0.6 percent at 27,153,83 (close)
Hong Kong - Hang Seng Index: DOWN 1.6 percent at 18,147.95 (close)
Shanghai - Composite: DOWN 0.3 percent at 3,108.91 (close)
Pound/dollar: DOWN at $1.1256 from $1.1270 Wednesday
Euro/dollar: DOWN at $0.9821 from $0.9837
Euro/pound: DOWN at 87.24 pence from 87.29 pence
Dollar/yen: DOWN at 142.25 yen from 144.06 yen
Brent North Sea crude: UP 0.9 percent at $90.63 per barrel
West Texas Intermediate: UP 0.9 percent at $83.69 per barrel