The DAX German stock price index chart is pictured on the stock exchange in Frankfurt, Germany, September 5, 2018. REUTERS/Staff/File Photo

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NEW YORK/LONDON, Jan 21 (Reuters) – Risk aversion dominated on Friday as stocks slumped in Europe, Wall Street tumbled, oil prices tumbled and bond prices surged, traders rushing for the relative safety of public debt.

Investors’ nerves about the Federal Reserve’s aggressiveness in tightening monetary policy were rattled by weak Netflix subscriber growth Thursday night. Its stock price fell nearly 20% and sent US and other markets tumbling.

The Nasdaq, the best performer of the stock market boom since the start of the pandemic, fell more than 10% from an all-time high in November and is poised for its worst week since markets collapsed in March 2020.

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With expectations that the Fed will hike interest rates up to four times this year and also shrink its balance sheet, fear of a hard landing has increased significantly, said Steven Ricchiuto, chief US economist at Mizuho Securities USA LLC. .

Ricchiuto said it might be overplayed.

“We are very confident that the economy will not fall into a recession even if it looks like the Fed is embarking on a policy error,” he said in a note.

Yields on US Treasuries and Eurozone government bonds fell as concerns over a potential conflict in Ukraine also dampened risk appetite and stock market declines increased demand for the debt.

The yield on 10-year Treasury bills slipped 5.8 basis points to 1.776%, a sharp decline from the two-year high of 1.902% hit on Wednesday.

In Europe, the German, French and Italian indices fell around 2%, with the broad Euro STOXX (.STOXX) index of the top 600 regional companies falling 1.97%. MSCI’s All Country World Index (.MIWD00000PUS) fell 0.48%.

On Wall Street, the Dow Jones Industrial Average (.DJI) fell 0.30%, the S&P 500 (.SPX) 0.67% and the Nasdaq Composite (.IXIC) 1.06.

Asian markets were down overall, including in China where benchmark mortgage rates were cut on Thursday in the latest move to prop up an economy embittered by its property sector. Read more

But the steepest declines in recent days have been in US markets, with the benchmark S&P 500 index heading for its worst month since late 2020.

The S&P 500 stock index is expected to see the biggest weekly decline since the end of 2020

The US dollar edged lower along with US Treasury yields, with investors looking to next week’s Fed meeting for clarity on the outlook for rate hikes and quantitative tightening.

The dollar index, which tracks the greenback against a basket of six currencies, fell 0.17% to 95.595, while the yen slipped 0.31% to $113.7400. The euro last rose 0.30% to $1.1344.

Oil prices fell for a second day, pressured by an unexpected rise in U.S. crude and fuel inventories, as investors took profits after global oil benchmarks hit highs in seven years.

Brent fell $0.58 to $87.8 a barrel. U.S. crude fell $0.48 to $85.07 a barrel.

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Reporting by Herbert Lash, additional reporting by Sujata Rao in London and Kanupriya Kapoor and Stella Qiu in Singapore; Editing by Raissa Kasolowsky, Kirsten Donovan and Alexander Smith

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