Global stock markets nursed steep losses on Wednesday on resurgent fear that sharp interest rate hikes, aimed at tackling runaway inflation, could spark recession, dealers said.

Asia and Europe slumped after a gloomy US consumer confidence report had sent Wall Street tumbling on Tuesday.

European sentiment was rocked also by data showing Spanish inflation rocketed to a 37-year peak of 10.2 per cent in June on rising energy and food prices. 

The news sent the Madrid stock market down 1.8 per cent, mirroring losses in Frankfurt and Hong Kong.

"So much for the big stock market comeback. Another day, another sea of red on the market," said AJ Bell investment director Russ Mould.

The selloff followed more than a week of global gains caused by hopes that any signs of contraction could give central banks room to ease up on their pace of monetary tightening.

But New York stocks tanked on Tuesday on data showing confidence among US consumers – a key driver of the world's top economy – had fallen to its lowest level in more than a year.

The data re-ignited stubborn worries over the strength of the world economy, and eclipsed news of a surprise move by China to slash the quarantine period for incoming travellers.

That had raised hopes for further relaxations that can allow the country's giant economy to recover more quickly.

'Down the drain'

"With signs that consumer confidence is seeping away, worries that global growth will go down the drain have returned to rattle financial markets," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

With signs that consumer confidence is seeping away, worries that global growth will go down the drain have returned to rattle financial markets- Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown

"COVID restrictions may have eased for international travellers to China as infections rates slow, but one global problem is being replaced by another – fear that recessions are looming around the world."

Fed officials on Tuesday tried to play down the chances of a recession, expressing hope of a soft landing.

Oil prices advanced on expectations of demand growth as China lifts COVID restrictions and owing to tight supplies following bans on Russian imports.

Observers warned that G7 plans for a price cap on Russian crude was unlikely to have a massive impact on benchmark values.