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| - Stock markets slumped Thursday on worries that soaring US inflation could trigger interest rate rises sooner than expected, in turn harming global economic recovery. Focus was also on bitcoin, which resumed sharp falls after Tesla's Elon Musk stopped allowing people to pay for its electric cars with the cryptocurrency. After Tokyo's main stocks index closed down 2.5 percent, Europe followed suit with London down 2.0 percent in midday trading. Wall Street had already slumped by a similar amount Wednesday following the US inflation number, while oil prices were also down sharply. The dollar held Wednesday's healthy gains on bets that US borrowing costs could rise faster than anticipated. Stock markets were already awash with red this week owing to growing fears that the blockbuster global economic recovery and vast stimulus measures will see cashed-up shoppers go on a pent-up spending spree that will strain supplies and push up costs. And those concerns were given oxygen Wednesday by figures showing US consumer inflation spiked at 4.2 percent in April, far higher than estimates and the highest since 2008 just before the global financial crisis kicked in. The advance was driven by a rally in commodities prices such as widely-used copper, iron and lumber, which are sitting at record or multi-year highs. "For stocks this might be an even tougher moment, given that companies may find themselves struggling to pass on price increases to customers, hitting profitability and putting the year-long earnings recovery in jeopardy," noted Chris Beauchamp, chief market analyst at IG trading group. Tech firms, which blossomed during lockdowns as people were forced to stay home, have led the share-price losses as they are more susceptible to higher interest rates. The Fed has repeatedly insisted it expects such sharp price spikes but they will be transitory owing to last year's low base and policymakers will not make any adjustments until they are happy unemployment is under control and inflation is running hot for some time. However, investors are not convinced and there is growing unease that the central bank could lose control of the situation if it does not act in time, with analysts warning it could risk people's confidence in the institution. Tai Hui, at JP Morgan Asset Management, remained broadly upbeat about the outlook for equities, saying that while the sell-off was heavy, the gain in US Treasury yields -- a gauge of future interest rates -- was less severe. "The market's reaction... (was) mild, reflecting the belief that this jump in inflation will eventually calm and revert closer to the Fed's long-term target," he said. "Hence, the Fed's insistence that inflation is only transitory does have an audience. But if inflation data does not calm in the next few months, the challenge to its credibility could be disruptive." Regarding bitcoin meanwhile, after Musk cited the environmental impact caused by the computing-intense mining process of creating new units, the cryptocurrency slumped around 16 percent. It later recovered before trading down around ten percent at $49,500 on Thursday. London - FTSE 100: DOWN 2.1 percent at 6,860.06 points Frankfurt - DAX 30: DOWN 1.4 percent at 14,946.33 Paris - CAC 40: DOWN 1.1 percent at 6,213.09 EURO STOXX 50: DOWN 1.4 percent at 3,893.92 Tokyo - Nikkei 225: DOWN 2.5 percent at 27,448.01 (close) Hong Kong - Hang Seng Index: DOWN 1.8 percent at 27,718.67 (close) Shanghai - Composite: DOWN 1.0 percent at 3,429.54 (close) New York - Dow: DOWN 2.0 percent at 33,587.66 (close) Euro/dollar: DOWN at $1.2067 from $1.2072 at 2030 GMT Pound/dollar: DOWN at $1.4019 from $1.4053 Euro/pound: UP at 86.07 pence from 85.89 pence Dollar/yen: UP at 109.64 yen from 109.63 yen Brent North Sea crude: DOWN 2.4 percent at $67.63 per barrel West Texas Intermediate: DOWN 2.6 percent at $64.39 per barrel dan-bcp/rfj/rl
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