Stock markets retreated Thursday, with the heaviest losses in Asia, as rising inflation fears offset optimism about the re-opening of virus-hit economies, traders said.
The growing belief is that in the coming months, a spending splurge from pent-up consumers exiting lockdowns — and a huge imminent US stimulus package — will light a rocket under prices.
This in turn could force central banks to wind back ultra-easy monetary policies — including record-low interest rates — that have been a key driver of the surge in stocks markets.
All eyes will be on US Federal Reserve chief Jerome Powell when he speaks later Thursday, for his latest take on a rise in US Treasury bond yields, a crucial guide of future rate expectations, to one-year highs in recent weeks.
The focus is also on OPEC, which along with other key oil producers, is Thursday expected to raise output in response to a rebound in demand and prices.
While crude futures fell ahead of the decision, they have shot up since tanking last year on the pandemic fallout.
Elsewhere Thursday, the dollar was higher versus its main rivals.
"Bond yield concerns are back to haunt investors," said Sophie Griffiths, market analyst at Oanda trading group.
"The market hasn't been able to shake off rising bond yield concerns despite reassurance from Federal Reserve chair Jerome Powell that any tightening in policy was still a long way off."
After a strong performance Wednesday, Asian stocks were back in the red. Tokyo, Hong Kong and Shanghai all closed down more than two%.
US senators are due to start debating Biden's stimulus, with the president giving way on some demands from moderate Democrats to put a cap on the number of people getting a $1,400 cash handout to remove high earners.
The decision, analysts say, could reduce the cost of the rescue package but it would still likely be more than $1.5 trillion.
The talks come as data showed fewer than expected US private payroll jobs were created in February as the country was slammed by a severe freeze, leading to speculation Friday's closely-watched government figures could also miss forecasts.
On the corporate front, takeaway meals app Deliveroo said it had chosen London for its stock market listing, a major boost for the capital's financial sector which has been roiled by Brexit.
Deliveroo, in line with other home-delivery companies, has seen demand soar in the past year owing to lockdowns during the coronavirus pandemic.
No date has been set for the initial public offering (IPO), with the group already valued at more than $7.0 billion (5.8 billion euros).
Key figures around 1130 GMT
- London - FTSE 100: DOWN 1.1% at 6 601.59 points
- Frankfurt - DAX 30: DOWN 0.7% at 13 979.68
- Paris - CAC 40: DOWN 0.5% at 5 802.79
- EURO STOXX 50: DOWN 0.7% at 3 687.12
- Tokyo - Nikkei 225: DOWN 2.1% at 28 930.11 (close)
- Hong Kong - Hang Seng: DOWN 2.2% at 29 236.79 (close)
- Shanghai - Composite: DOWN 2.1% at 3 503.49 (close)
- New York - Dow: DOWN 0.4% at 31 270.09 (close Wednesday)
- Euro/dollar: DOWN at $1.2039 from $1.2071 at 2100 GMT
- Pound/dollar: DOWN at $1.3933 from $1.3954
- Euro/pound: UP at 86.45 pence from 86.41 pence
- Dollar/yen: UP at 107.34 yen from 106.96 yen
- Brent North Sea crude: DOWN 0.3% at $63.87 per barrel
- West Texas Intermediate: DOWN 0.3% at $61.08 per barrel