(Bloomberg) — Investors fled into the safety of bonds and stocks wavered as a lurch toward higher interest rates together with weak euro-area activity data heightened anxiety that aggressive central bank policy will tip economies into recession.

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Global stocks headed for their biggest weekly decline in more than three months. European shares fluctuated, with a record 36% drop in Siemens Energy AG’s shares after a profit warning dragging on the broader market. US index futures fell.

“Financial markets have had one of those switches in the narrative that happen occasionally, and are starting to worry about higher interest rates driving recessions,” said Paul Donovan, chief economist at UBS Global Wealth Management.

A rally in European bonds sent five-year German yields plummeting as much as 15 basis points to 2.49%, putting them on course for the biggest drop since April. US Treasuries yields fell in sympathy, with the 10-year benchmark note shedding 7 basis points.

Germany’s economic activity lost much more momentum than anticipated in June, driven by a slowdown in services and sustained weakness at the country’s factories, according to business surveys by S&P Global. Separate data for France showed its economy probably slumped in the three months through June. The euro fell sharply following the figures.

Read more: Euro-Zone Activity Almost Stalls as Recession Rebound Fades

Concern about the economic outlook was reflected in a rotation into bonds and out of stocks in weekly flow data. Investors yanked $5 billion from global equity funds in the week through Wednesday and added $5.4 billion to bonds.

US stocks face more downside than upside over the next two months as banks and property firms “still have bad recession vibes,” according to the note from Bank of America strategists citing EPFR Global data.

Treasury two-year yields hovered around 4.8% and near the highest since March after Federal Reserve Chair Jerome Powell said the US may need one or two more rate increases in 2023.

Read more: Bonds Rally, Euro Falls on Fears Economy Is Starting to ‘Buckle’

On Thursday the Bank of England unexpectedly raised its benchmark interest rate by a half percentage point, warning it may have to hike again. A rise in UK retail sales in May indicated strength in the economy that the central bank fears may be feeding inflation. The week also saw Norway’s central bank accelerate its hikes and pledge more aggressive tightening, intensifying its response to stubborn inflation and a weak currency.

Key events this week:

  • Fed Bank of St. Louis President James Bullard speaks, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures fell 0.4% as of 4:46 a.m. New York time

  • Nasdaq 100 futures fell 0.6%

  • Futures on the Dow Jones Industrial Average fell 0.2%

  • The Stoxx Europe 600 was little changed

  • The MSCI World index fell 0.4%

  • The MSCI Asia Pacific Index fell 1.4%

  • The MSCI Emerging Markets Index fell 0.9%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.5%

  • The euro fell 0.9% to $1.0861

  • The British pound fell 0.3% to $1.2709

  • The Japanese yen was little changed at 143.05 per dollar

  • The offshore yuan fell 0.3% to 7.2151 per dollar

Cryptocurrencies

  • Bitcoin fell 0.4% to $30,037.39

  • Ether was little changed at $1,888.44

Bonds

  • The yield on 10-year Treasuries declined six basis points to 3.74%

  • Germany’s 10-year yield declined 14 basis points to 2.36%

  • Britain’s 10-year yield declined 13 basis points to 4.24%

Commodities

  • West Texas Intermediate crude fell 1.7% to $68.35 a barrel

  • Gold futures rose 0.3% to $1,929.90 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Denitsa Tsekova, Macarena Muñoz, Brett Miller and Greg Ritchie.

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