“A series of rate hikes and hawkish communication came amid falling Chinese and European activity, new energy ban plans in Russia and continued supply pressures,” warned Barclays analysts.
“This creates the grim prospect of persistent inflation forcing central banks to raise rates despite sharply slowing growth.”
There has been no relaxation in China’s zero COVID policy, with Shanghai tightening a citywide COVID lockdown for 25 million residents.
S&P 500 stock futures led the way down 0.6%, while Nasdaq futures lost 0.7%. US 10-year bond futures also lost 8 ticks.
Nikkei futures were trading at 26,745 against a spot close of 27,003 on Friday.
Investors were also on edge ahead of the U.S. consumer price report, due Wednesday, which predicts only a slight drop in inflation, and certainly nothing to stop the Federal Reserve from rising further. at least 50 basis points in June.
Indeed, core inflation should increase by 0.4% in April, against 0.3% the previous month, even if the annual rate slows down a little due to base effects.
“In the first quarter, the annualized monthly change in core CPI was 5.6%,” the ANZ analysts said. “That’s too high for the Fed and we believe the FOMC won’t be relaxed on inflation until the core figure moderates to around 0.2% m/m on a sustainable basis.
“The Fed is not the only central bank facing inflationary pressures. Increasingly, the ECB’s guidance is becoming much more belligerent.”
Federal funds futures prices forecast rates will hit 1.75-2.0% in July, up from 0.75-1.0% currently, and climb to around 3% by the end of the month. anne.
The agenda is packed with Fed speakers this week, giving them plenty of opportunities to keep the refrain hawkish.
The aggressive rate outlook took the US dollar to 20-year highs across a basket of major currencies last week at 104.070, and it traded firmly at 103.760.
The euro remained stuck at $1.0534, just slightly above its recent low of $1.0481, while the dollar was very well contained against the Japanese yen at 130.72.
Oil prices fell slightly in early trade, as the Group of Seven (G7) countries pledged on Sunday to ban or phase out imports of Russian oil.
Russia is celebrating VE Day on Monday, amid speculation that President Vladimir Putin may declare war on Ukraine to call up reserves.
Brent was last priced 75 cents lower at $111.64, while US crude was down 78 cents at $108.99. [O/R]
Gold was sluggish at $1,876 an ounce, having struggled to establish itself as a safe haven lately. [GOL/]