Volkswacht Bodensee - European stocks drop on record eurozone inflation

Frankfurt, London and Paris stocks dropped as data showed eurozone inflation hit 9.1 percent in August on surging fuel prices, sparking talk of rising European Central Bank rates.

Most Asian markets meanwhile fell on concerns the US Federal Reserve's rate-hiking policy would send the world's biggest economy into recession, with oil prices diving on demand jitters.

The ECB is set to lift borrowing costs next week, having increased them in July for the first time in a decade to help tackle rampant inflation.

- 'Real' recession risk -

"The reality is that a more aggressive (ECB) tightening is going to be needed, and when the economy is already as fragile as it is, the situation quickly starts to look quite problematic," OANDA analyst Craig Erlam told AFP.

"That's not good for stocks as it's extremely difficult for companies to prosper if the bloc is in a deep recession made worse by higher interest rates, which is now a real risk."

Major central banks are rushing to contain runaway consumer price inflation that has largely been prompted by fallout from key energy supplier Russia's invasion of Ukraine.

State energy giant Gazprom suspended gas deliveries to Germany on a major pipeline on Wednesday.

It was the latest in a series of supply halts that have fuelled Europe's energy crisis and sent gas and electricity prices soaring before the peak-demand winter.

- Sentiment takes a hiding -

Wall Street's three main indexes fell for a third straight day Tuesday to sit at a one-month low, despite healthy data on US consumer sentiment and job openings.

Investor sentiment took a hiding after Fed chief Jerome Powell warned last Friday that the US central bank would need to tighten policy much more to tackle sky-high inflation.

"Inflation remains the key issue, with commentary from both the Fed and ECB serving to highlight the fact that controlling prices will remain the central target irrespective of economic suffering," IG analyst Joshua Mahony told AFP.

"A drawn out period of higher costs, higher wages, and lower demand point towards further downside for equity markets," he noted.

Traders are now awaiting the release of US job-creation figures on Friday for a better idea about the state of the economy.

- Key figures at around 1130 GMT -

London - FTSE 100: DOWN 1.1 percent at 7,279.75 points

Frankfurt - DAX: DOWN 0.4 percent at 12,912.99

Paris - CAC 40: DOWN 0.7 percent at 6,168.14

EURO STOXX 50: DOWN 0.5 percent at 3,545.14

Tokyo - Nikkei 225: DOWN 0.4 percent at 28,091.53 (close)

Hong Kong - Hang Seng Index: FLAT at 19,954.39 (close)

Shanghai - Composite: DOWN 0.8 percent at 3,202.14 (close)

New York - Dow: DOWN 1.0 percent at 31,790.87 (close)

Euro/dollar: DOWN at $0.9996 from $1.0015 on Tuesday

Pound/dollar: DOWN at $1.1629 from $1.1656

Euro/pound: UP at 85.95 pence from 85.92 pence

Dollar/yen: DOWN at 138.71 yen from 139.00 yen

West Texas Intermediate: DOWN 2.7 percent at $89.16 per barrel

Brent North Sea crude: DOWN 3.3 percent at $96.00 per barrel

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A.Gasser--BTB