Surging rates on dollar Libor contracts are rapidly tightening conditions across large parts of the global economy, incubating stress in the credit markets and ultimately threatening overvalued bourses.

Three-month Libor rates - the benchmark cost of short-term borrowing for the international system - have tripled this year to 0.88pc as inflation worries mount.

Fear that the US Federal Reserve may have to raise rates uncomfortably fast is leading to an increasingly acute dollar shortage, draining global liquidity.

"The Libor rate is one of the few instruments left that still moves freely and is priced by market forces. It is effectively telling us that that the Fed is already two hikes behind the curve," said Steen Jakobsen from Saxo Bank.

"This is highly significant and is our number one concern. Our allocation model is now 100pc in cash. This is a warning signal for the market and it happens extremely rarely," he said.

Goldman Sachs estimates that up to 30pc of all business loans in the US are priced off libor contracts, as well as 20pc of mortgages and most student loans. It is the anchor for a host of exotic markets, used as a floor for 90pc of the $900bn pool of the leveraged loan market. It underpins the derivatives nexus.