A broker reacts while trading at his computer terminal at a stock brokerage firm in Mumbai, India, February 1, 2020.
A broker reacts while trading at his computer terminal at a stock brokerage firm in Mumbai, India, February 1, 2020. Reuters / FRANCIS MASCARENHAS

Global shares sank to their lowest point in 18-months on Thursday while the dollar hit a 20-year-high, as investors feared that inflation pushing up interest rates will bring the global economy to a standstill.

Those nerves and a German warning that Russia was now using energy supplies as a "weapon" put pressure on Europe's continent-wide STOXX 600 index, which was down 0.63%. MSCI's gauge of stocks across the globe was down 0.67%, as of 11:31 ET (1520 GMT).

That flagship global index is nearly 20% lower for the year - its worst start to a year in recent memory.

U.S. markets were mixed. The Dow Jones Industrial Average fell 160.04 points, or 0.5%, the S&P 500 lost 6.9 points, or 0.18%, and the Nasdaq Composite added 65.04 points, or 0.57%. [.N]

The dollar index rose 0.452%, with the euro down 1% to $1.0406. The global growth-sensitive Australian and New Zealand dollars fell about 0.8% to almost two-year lows. The Chinese yuan slid to a 19-month trough..

Nearly all the main volatility gauges were signalling danger. Bitcoin was caught in a fire-sale of risky crypto assets as it fell another 8% to $26,570, having been near $40,000 just a week ago and almost $70,000 last November.

"We have had big moves," UBS's UK Chief Investment Officer Caroline Simmons, said, also referring to bond markets and economic expectations. "And when the market falls it does tend to fall quite fast."

Tensions were stoked again as Finland confirmed it would apply to join NATO "without delay" in the wake of Russia's invasion of Ukraine, a war that has already had a major economic effect by driving up global energy and food prices.

The U.S. Labor Department said the producer price index for final demand rose 0.5% in April as the rising cost of energy products moderated. The PPI surged 1.6% in March.

The slowdown in monthly producer price gains follows a similar trend in consumer prices last month.

Data on Wednesday showed U.S. inflation running persistently hot, although increasing by the slimmest amount in eight months. Headline consumer prices rose 8.3% in April year-on-year, fractionally slower than the 8.5% pace of March, but still above economists' forecasts for 8.1%.


The main pan-Asia Pacific indexes closed down 2.5% at a 22-month low overnight. Japan's Nikkei fell 1.8. Emerging market stocks lost 2.28%.

U.S. Treasury yields slid on Thursday. The yield on 10-year Treasury notes fell 4.3 basis points to 2.870% as the benchmark U.S. government bond pared losses after sinking to a morning low of 2.8173%.

Germany's 10-year yield, the benchmark for Europe, fell as much as 15 bps to 0.85%, its lowest in nearly two weeks.

The prospect of the fastest hike in Fed rates in decades is driving up the U.S. dollar and taking the heaviest toll on riskier assets that shot up through two years of pandemic-era stimulus and low-rate lending.

The Nasdaq is down nearly 8% in May so far and more than 25% this year. Hong Kong's Hang Seng Tech index slid 1.5% on Thursday and is off more than 30% this year.

Cryptocurrency markets are also melting down, with the collapse of the so-called stablecoin TerraUSD highlighting the turmoil as well as the selling in bitcoin and next-biggest-crypto, ether, which slumped 15%.nL3N2X337U]

Tether, currently the world's largest stablecoin by market cap with a value directly tied to the dollar broke below its so-called U.S. dollar "peg" on Thursday. The global sell-off has now wiped more than $1 trillion off crypto markets. Around 35% of that loss has come this week.

"The collapse of the peg in TerraUSD has had some nasty and predictable spillovers. We have seen broad liquidation in BTC, ETH and most ALT coins," said Richard Usher, head of OTC trading at BCB Group, referring to other cryptocurrencies.

In commodity trade, oil rose on supply concerns.

U.S. crude rose 1.27% to $107.05 per barrel and Brent was at $108.38, up 0.81% on the day. [O/R]

Gold and other precious metals dropped on Thursday, with palladium shedding more than 8%, as investors flocked to the dollar.

Spot gold fell 0.7% to $1,838.50 per ounce by 11:31 a.m. EDT (1531 GMT). U.S. gold futures were down 0.8% at $1,839.10. [MET/L]

Benchmark copper on the London Metal Exchange (LME) was down 3.6% at $9,000 a tonne in official trading after falling as low as $8,938. Prices are down 17% from a record high of $10,845 reached in March.