Global markets awash in a sea of red

Global shares sank to two- year lows on Wednesday as surging borrowing costs and a worsening energy crisis intensified fears that the world could tip into recession, sending investors dashing for the safe- haven dollar.

Yields on US 10- year Treasuries topped 4percent for the first time since 2010 as markets bet the Federal Reserve might have to take interest rates past 4.5percent in its crusade against inflation. The pound came under fire again on the back of a renewed surge in UK bond yields that have driven the government’s borrowing costs above those with heavier debt burdens such as Greece or Italy. The IMF and ratings agency Moody’s criticised Britain’s new economic strategy announced on Friday, which has sparked a collapse in the value of UK assets. Investors are braced for more havoc in bond markets that has already forced the Bank of England to promise “significant” action. Central banks around the world have jacked up interest rates over the past week and said they would do whatever it takes to fight red- hot inflation, particularly as the northern hemisphere winter risks worsening a global energy crunch. “Inflation has surprised to the upside everywhere and dollar strength is becoming a headache for global central banks,” said Ugo Lancioni, head of global currency at Neuberger Berman.