The resurgence of the dollar ahead of inflation data and the United States (US) midterm elections broke a 7-session rally in equities.
It is understood that the recent election situation saw a split in Congress, which does not bode well for the outlook for US fiscal spending and regulation.
Ameriprise Financial's chief market strategist, Anthony Saglimbene, commented that the failure of the Democratic or Republican parties to gain control of Congress means a split government for the next 2 years.
It signals a potential conflict in the agenda, and while not changing spending, this could limit any significant increase in spending.
In the meantime, the release of consumer price index (CPI) data that is expected to be released tonight also contributed to the decline in risky assets.
A survey of economic analysts forecast US inflation on a monthly and annual basis down to 0.5% and 6.5%, but based on the hawkish comments of Federal Reserve (Fed) Chairman Jerome Powell it did not change the sentiment of concern.
State Street Global Advisors head of investment strategy, Michael Arone, explained that investors expect inflation data to be able to reflect the efforts made by the central bank and if not then the market will continue to be in uncertainty.
That streak, Arone stuck to Powell's aggressive comments and predicted the Fed would implement aggressive rate hikes regardless of the outcome of the inflation reading.
As a result, the Dow Jones Industrial index fell 1.6% while the S&P 500 lost 1.74% and the Nasdaq Composite fell 2.16%.
Europe's STOXX 600 index fell 0.30% and MSCI's gauge of global shares slipped 1.41%.
Asian trading showed Japan's Nikkei 225 down 0.9%, Topix down 0.65%, South Korea's Kospi down 0.53%, Australia's S&P/ASX 200 down 0.43% and the MSCI Asia Pacific gauge of shares outside Japan lost 0.2%.
