Global shares tumbled on Friday as investor euphoria over tech stocks gave way to inflation fears, sending bond yields higher and lifting expectations for interest rate hikes this year.
MSCI's main world stocks index shed 0.35 per cent.
Europe's STOXX 600 dropped 1.37 per cent after rising for the previous two sessions.
Nasdaq futures fell 1.32 per cent and S&P 500 futures slipped 0.9 per cent after Wall Street hit fresh highs on a 4 per cent surge in AI darling Nvidia.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 2.54 per cent.
Japan's Nikkei slid 1.99 per cent after data showed wholesale inflation accelerated to 4.9 per cent in April, the fastest pace in three years, keeping the Bank of Japan on track to raise rates.
Over the last few days, "it's just been this relentless rally. So I think we're at a point where that rally exhausts itself a little bit", said Tim Graf, managing director and head of macro strategy for EMEA at State Street Markets.
But he added that equities remain supported.
"I think if anything is enough to create a pullback, it is what's happening in rate markets and the prospect that inflation will remain above target for a lot of these central banks and they'll maybe have to tighten it", he said.
Oil prices climbed as uncertainty over a Middle East peace deal and the reopening of the Strait of Hormuz stayed in focus. Brent crude futures rose 2.3 per cent to $108.14 a barrel, on track for a 6.7 per cent weekly gain.
Attention is also on Beijing where US President Donald Trump wrapped up a state visit. After meeting Chinese President Xi Jinping, Trump said they agreed Iran must not be allowed a nuclear weapon and must reopen the Strait of Hormuz.
"President Trump's China visit is ongoing and offering a welcome break from Iran war angst. But that is what we are going right back to", said Padhraic Garvey, regional head of research, Americas at ING.
"The front and centre issue is delivered inflation, which remains troubling from a Treasury market perspective. We maintain a viewpoint centred in an upside test for yields in the weeks ahead".
Rising inflation risks, fuelled by higher oil prices, renewed pressure on global bond markets on Friday.
Yields on the German 10-year bond, the benchmark for the euro zone, were last up by more than 7 basis points to 3.1199 per cent, while Japanese yields hit record highs.
The yield on US two-year notes US2YT=RR rose 5.8 bps to 4.0498 per cent and the 10-year yield US10YT=RR climbed 7.7 bps to 4.5358 per cent, trading around their highest level in roughly a year.
Concerns about inflation also hit demand for US Treasuries, with a run of soft auctions this week underscoring market fragility.
The dollar was set for a 1.4 per cent weekly gain — the most in two months — supported by the lack of progress in the Gulf.
The greenback's strength pushed the yen to the weaker side of 158 per dollar and kept traders alert for further intervention from Tokyo. — Reuters
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