New York (AFP) - Global stocks mostly fell Friday, with US markets notching their biggest losses since the Brexit vote, as US central bankers signaled they could hike interest rates as soon as this month.
With the Federal Reserve's next policy meeting 11 days away, major US indices tumbled more than two percent, with the Dow falling nearly 400 points, at the rising spectre of tightening monetary conditions.
Markets were jolted when Boston Fed President Eric Rosengren said in a speech that higher rates were needed to prevent the economy from overheating.
A second Fed official, normally dovish Governor Daniel Tarullo, meanwhile signaled his openness to a rate hike in 2016 in a television interview.
The unexpected turn to a more pro-hike stance also weighed on markets in Europe, where sentiment was already downcast after the European Central Bank opted Thursday against expanding its stimulus program.
"Given the European Central Bank commentary yesterday as well as some Fed speakers today, it appears more likely that the Fed and the world is closer to lessening the amount of easy money," said David Levy, portfolio manager at Republic Wealth Advisors.
Bourses in London, Paris and Frankfurt all lost one percent or more.
In Asia, the focus was on North Korea's apparent test of a nuclear warhead that it claimed could be mounted on a missile.
Seoul's KOSPI index fell almost 1.3 percent, while Sydney and Singapore each lost 0.9 percent.
Japan's Nikkei index finished essentially flat as worries about North Korea were offset by speculation that the Bank of Japan may expand its stimulus program.
- Retreat from US records -
US stocks had rallied to records in the last two months after plunging following the June 23 British vote to exit the European Union.
But analysts were already cautioning that a correction was possible given the importance of central bank-generated liquidity to the stock market gains.
Rosengren indicated the Fed desires higher rates despite mixed US economic data.
"If we want to ensure that we remain at full employment, gradual tightening is likely to be appropriate," he said.
Investors took that as a sign that an increase in the benchmark federal funds rate could come as early as the Fed's September 20-21 meeting.
US losses were broad-based across industrial and technology blue chips, with energy shares also hit by a reversal in crude prices.
Howard Silverblatt, a senior index analyst at S&P Dow Jones Indices, said the market was primed for a shift.
"After no significant declines, many had expected one," he said.
"While the hope is that the weekend will act like a circuit-breaker, the concern is that given the uncertainty over the economy, interest rates, trade, high multiples and the US elections, some profit taking may seem appealing."
- Key figures around 2100 GMT -
New York - DOW: DOWN 2.1 percent at 18,085.45 (close)
New York - S&P 500: DOWN 2.5 percent at 2,127.81 (close)
New York - Nasdaq: DOWN 2.5 percent to 5,125.91 (close)
London - FTSE 100: DOWN 1.2 percent at 6,776.95 (close)
Frankfurt - DAX 30: DOWN 1.0 percent at 10,573.44 (close)
Paris - CAC 40: DOWN 1.1 percent at 4,491.40 (close)
EURO STOXX 50: DOWN 1.0 percent at 3,053.20 (close)
Tokyo - Nikkei 225: UP less than 0.1 percent at 16,965.76 (close)
Shanghai - Composite: DOWN 0.6 percent at 3,078.85 (close)
Hong Kong - Hang Seng: UP 0.8 percent at 24,099.70 (close)
Euro/dollar: DOWN at $1.1232 from $1.1261
Pound/dollar: DOWN at $1.3268 from $1.3295
Dollar/yen: UP at 102.69 yen from 102.48