Stocks have lurched downwards as US debt ceiling negotiations drag on without resolution, stoking a general malaise in markets that is seeing safe haven assets like the dollar and gold hold around recent highs.

The New Zealand dollar meanwhile tumbled after the central bank caught markets off-guard by flagging that its tightening cycle is over.

Europe's benchmark STOXX index fell 1.7 per cent to a three-week low in early trading, as a jump in UK core inflation and more losses in market-heavy luxury names hurt risk sentiment. MSCI's broadest index of Asia-Pacific shares fell 0.8 per cent.

UK homebuilders led declines on the FTSE 100 after data showed a closely watched core measure of UK price growth surged to a 31-year high in April, cementing bets of more interest rate hikes from the Bank of England.

Europe's luxury stocks fell nearly two per cent to a seven-week low as a sell-off in the sector continued.

Crude oil prices kept rising, though, after a warning from the Saudi energy minister to speculators that raised the prospect of further OPEC+ output cuts.

The New Zealand dollar dropped as much as 1.3 per cent after the Reserve Bank wrong-footed markets by keeping its forecast for the terminal rate at 5.5 per cent, after hiking by a quarter point to that level.

"It's an indication that the tightening cycle is over," said Jason Wong, a strategist at Bank of New Zealand. "No one was really expecting that."

Market pricing had favoured a half-point hike, and traders were also primed for an extension of the tightening streak.

US equity futures suggested Wall Street would inherit the sour market mood from Europe, with S&P 500 and Nasdaq futures down around 0.3 per cent.

Representatives of President Joe Biden and congressional Republicans ended another round of debt ceiling talks on Tuesday with no signs of progress.

Treasury Secretary Janet Yellen has warned that the federal government could no longer have enough money to pay all its bills as soon as June 1, raising the risk of a damaging default.

While the risk of a default that could precipitate a recession is bad for the United States, investors worried about the repercussions for the global economy have turned away from riskier assets.

Reports that Treasury has asked federal agencies whether they can delay upcoming payments added to the sense of crisis.

"Payment prioritisation is now real," Chris Weston, head of research at brokerage Pepperstone in Melbourne, wrote in a client note.

"And while it seems highly prudent to have this conversation, the market's anxiety levels have heated up consequently," he said. "The market is starting to de-risk."

The US dollar index, which measures the currency against six major peers, rose 0.17 per cent to 103.7, nudging further above a two-month high of 103.63 reached last week.

Euro zone bond yields rose after British inflation data came in stronger than expected, a reminder to investors that the global fight against price rises is far from over.

Germany's 10-year bond yield, the benchmark for the euro zone, climbed to a one-month high of 2.501 per cent before paring its rise slightly. The 10-year US Treasury yield was little changed at 3.68 per cent. Yields move inversely to prices.

In commodities, gold traded in a narrow range around $US1,977 ($A3,008) as traders eyed debt ceiling talks and the possibility of further central bank hikes.

Interest rate hikes raise the opportunity cost of holding non-interest-bearing gold.

Crude oil price extended gains from Tuesday, when Saudi Energy Minister Prince Abdulaziz bin Salman warned speculators to "watch out," saying "they will be ouching."

Brent crude futures rose more than a dollar to $US77.95 ($A118.59) a barrel, while US West Texas Intermediate crude (WTI) likewise rose $US1.16 ($A1.76) to $US74.06 ($A112.67) a barrel.