London (AFP) - Stock markets mostly fell on Tuesday as investors fret over the possibility that the US Federal Reserve will move aggressively to combat inflation.
Panic has swept through trading floors since data on Friday showed US consumer prices rising at their fastest pace in decades on surging energy and food costs caused by the Ukraine war and supply chain snarls.
Investors are now bracing for the Fed's interest rate decision on Wednesday as it struggles to walk a fine line between reining in inflation and trying to keep the economy on track.
"While there is no doubt that inflation is a considerable challenge for the US at this point, slamming on the brakes too hard risks pushing the economy off its track," said Tai Hui, chief market strategist for Asia at JP Morgan Asset Management.
The inflation reading has raised expectations that the US central bank could raise rates by a hefty 75 basis points, higher than its previous 50-point hike.
"The mood has turned very negative since the latter half of last week," said Craig Erlam, analyst at online trading platform OANDA.
"Now all the talk is about if we're heading for a recession and how bad it will be," Erlam said.
Those recession fears sent Wall Street plunging on Monday, with the broad-based S&P 500 stocks index sinking into a bear market after dropping more than 20 percent from its recent peak.
After opening higher on Tuesday, US indices diverged near midday, with the S&P 500 flat while the Dow fell and the tech-heavy Nasdaq rose.
"An anaemic and now rapidly disappearing bounce in US markets shows us that investors are very cautious about going bargain-hunting ahead of tomorrow's momentous Fed decision," said Chris Beauchamp, chief market analyst at online trading platform IG.
"Not just 75bps but even 100bps are being viewed as a possibility on Wednesday evening, as the committee looks to try and steal a march on inflation," he said.
London, Paris, Frankfurt and most Asian equities closed in the red.
Oil prices, which have fuelled the global inflation surge, rose more than 1.5 percent, with Brent North Sea Crude, the international benchmark, above $124 per barrel.
Cryptocurrencies have mirrored the falls in the stock markets, with bitcoin tumbling to an 18-month low under $23,000 this week.
Digital currency exchange Coinbase said Tuesday it will lay off 18 percent of staff, citing tight economic conditions and an overly rapid expansion.
Key figures at around 1545 GMT
New York - Dow: DOWN 0.4 percent at 30,410.87 points
London - FTSE 100: DOWN 0.3 percent at 7,187.46
Frankfurt - DAX: DOWN 0.9 percent at 13,304.39
Paris - CAC 40: DOWN 1.2 percent at 5,949.84
EURO STOXX 50: DOWN 1.1 percent at 3,405.06
Tokyo - Nikkei 225: DOWN 1.3 percent at 26,629.86 (close)
Hong Kong - Hang Seng Index: FLAT at 21,067.99 (close)
Shanghai - Composite: UP 1.0 percent at 3,288.91 (close)
Euro/dollar: UP at $1.0414 from $1.0412 late Monday
Pound/dollar: DOWN at $1.2004 from $1.2136
Euro/pound: UP at 86.77 pence from 85.76 pence
Dollar/yen: UP at 134.88 yen from 134.42 yen
Brent North Sea crude: UP 1.7 percent at $124.34 per barrel
West Texas Intermediate: UP 1.5 percent at $122.77 per barrel
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