By Katanga Johnson and Marc Jones
WASHINGTON/LONDON (Reuters) - World equities wavered on Wednesday as investors digested a report showing U.S. annual consumer prices jumped 9.1% in June -the largest increase in more than four decades - leaving Americans to dig deeper to pay for gasoline, food, healthcare and rent.
Markets swung wildly as the euro touched 1-to-1 versus the dollar for the first time in 20 years, as investors also feared more supersized Fed rate hikes could be on the way.
The U.S. Federal Reserve is expected to deliver a rate hike of possibly up to 100 basis points this month after a mostly grim inflation report showed price pressures, already running at a 40-year high, accelerating further.
A bevy of central bankers over the past couple of weeks hadsignaled they would support what would be a second straight 75basis-point rate increase at their upcoming policy meeting onJuly 26-27.
But after Wednesday's data from the Labor Department showedrising costs of gas, food and rent drove the consumer priceindex (CPI) up 9.1% last month from a year earlier, the view mayhave changed.
Recession worries had already caused Europe's bourses to stumble [.EU], but the headline CPI number was even higher than most economists had forecast.
The pan-European STOXX 600 index lost 1.01% and MSCI's gauge of stocks across the globe shed 0.31%.
U.S. stocks closed modestly lower on Wednesday after investors digested the hotter-than-expected U.S. inflation data. While all three major U.S. equity indexes bounced off lows reached early in the day, and occasionally edged into positive territory throughout the session, they were all red by the closing bell.
The Dow Jones Industrial Average fell 0.67%, the S&P 500 lost 0.45%, and the Nasdaq Composite dropped 0.15%.
The Bank of Canada on Wednesday raised its main interest rate by 100 basis points in a bid to crush inflation, surprising markets and becoming the first G7 country to make such an aggressive hike in this economic cycle.
The euro only briefly brushed parity but it was enough. [FRX/] Germany's DAX and France's CAC40 nearly doubled their morning losses to 1.5% and 1.4% respectively. London's FTSE was not far behind [.EU] as another 4% rise in gas prices added to the pressures. [/FRX][O/R]
"CPI of 9.1% is the highest number in 40 odd years, the only piece of good news is that core inflation is slightly lower," said Close Brothers Asset Management Chief Investment Officer Robert Alster.
"And euro parity - well, European economic prospects continue to get worse, especially if the Russian gas doesn't start coming come through again."