LONDON (Reuters) - Stocks fell, while safe havens such as government bonds and the dollar rose, as already anxious investors fled risk assets.
European equity markets dropped sharply, with the benchmark euro zone STOXX 50E index falling by 1 percent at one point to a two-month low, which in turn dented U.S. emini stock futures, which pared overnight gains to trade roughly unchanged on the day, suggesting a flat start on Wall Street later.
European currencies came under fire, with the euro dropping 0.56 percent to $0.9913 and sterling last down 0.31 percent at $1.1345, after having touched a new 37-year low at $1.1304.
The dollar index, which measures the currency against six major peers, rallied 0.41 percent to 110.62, just below a fresh two-decade high of 110.87.
The dollar eased modestly against the Japanese yen, another safe-haven currency, dropping 0.1 percent to 143.58.
With the Federal Reserve due to deliver another aggressive rate hike later in the day, in a week packed with major central bank decisions, key market measures of volatility neared multi-week highs.
“Obviously we have a situation where investors flock to safe havens and we’ve also got the anticipation that we are going to see another rate hike from the Federal Reserve today,” Danni Hewson, a financial analyst at AJ Bell said.
Equities were already under pressure given the jitters around the Fed’s upcoming policy decision at which it is widely expected to lift rates by three quarters of a point.
The MSCI All-World index of global shares dropped 0.4 percent to skim two-month lows, while gold, another traditional safe-haven, gained 0.5 percent to trade around $1,667.40 an ounce, set for its largest one-day rally in over a week.
In Asia overnight, Japan’s Nikkei fell 1.36 percent and touched a two-week low.
The Fed headlines a week in which more than a dozen central banks announce policy decisions, including the Bank of Japan and Bank of England.
Sweden’s Riksbank surprised markets overnight with a full percentage-point hike, and warned of more to come over the next six months.