Stock markets on both sides of the Atlantic slumped to multi-year lows on Wednesday as investor risk appetite took a turn for the worse. The prospect of a sustained bout of deflation and weakening economic activity roiled equities and credit while government bonds rallied.

Equity indices in New York and across Europe tumbled after US consumer prices for October slid a record amount and showed that a steep slide in fuel prices was rapidly extinguishing inflationary pressure. In New York, the S&P 500 fell 6.1 per cent and closed at its lowest level in five and a half years.