Volkswacht Bodensee - Stocks slump further before key US inflation update

With major global equity indices shedding about 1.5 percent, focus turned to the release later in the day of US consumer price figures.

"There is little respite at present from inflationary concerns, giving investors little room for manoeuvre in navigating the darkening economic clouds," noted Richard Hunter, head of markets at Interactive Investor.

The European Central Bank on Thursday said it would raise interest rates next month to combat strong inflation, finally catching up with other major central banks that are tightening borrowing costs to try and cool the pace of consumer price rises.

Economists warn that surging inflation, driven by rocketing energy prices, could push top economies into recession.

Adding to the unease was news that officials in China had once again locked down millions of people for Covid testing owing to another flare-up in cases, dealing a blow to hopes for an economic reopening.

"Warning signs about the economy are emerging as weekly (US) jobless claims are starting to rise, China's Covid situation will prove troublesome for supply chains over the next couple of quarters, and as inflationary pressures broaden and show no sign of easing," said Edward Moya, analyst at OANDA trading group.

"It seems reductions in global growth forecasts will become a steady theme over the next few months and that should complicate how much more tightening we see from central banks," he added.

Moya said the darkening economic outlook could provide an argument for the Fed to apply the brakes to hiking US interest rates later in the year.

With prices having surged for much of this year, central banks have been forced to withdraw the vast pandemic stimulus that helped fuel a rally across stock markets to record or multi-year highs.

The US Labor Department is set to release the May consumer price index (CPI) data on Friday, with analysts saying the data may show a modest slowdown in the torrid annual pace.

US consumer prices jumped 8.3 percent in the 12 months ending in April.

One bright note Friday was data showing that China's producer price inflation eased last month to its lowest level in more than a year.

- Key figures at around 1045 GMT -

London - FTSE 100: DOWN 1.3 percent at 7,382.24 points

Frankfurt - DAX: DOWN 1.5 percent at 13,980.12

Paris - CAC 40: DOWN 1.6 percent at 6,257.33

EURO STOXX 50: DOWN 1.8 percent at 3,657.84

Tokyo - Nikkei 225: DOWN 1.5 percent at 27,824.29 (close)

Hong Kong - Hang Seng Index: DOWN 0.3 percent at 21,806.18 (close)

Shanghai - Composite: UP 1.4 percent at 3,284.83 (close)

New York - Dow: DOWN 1.9 percent at 32,272.79 (close)

Euro/dollar: DOWN at $1.0600 from $1.0620 late Thursday

Euro/pound: UP at 85.13 pence from 84.98 pence

Dollar/yen: DOWN at 133.84 yen from 134.40 yen

Pound/dollar: DOWN at $1.2450 from $1.2495

Brent North Sea crude: UP 0.8 percent at $124.09 per barrel

West Texas Intermediate: UP 0.5 percent at $122.17 per barrel

G.Schulte--BTB