S&P 500 stock futures led the way with a drop of 0.6%, while Nasdaq futures shed 0.7%
Asian markets got off to a shaky start on Monday as U.S. stock futures took an early skid on rate worries, while a tightening lockdown in Shanghai stoked concerns about global economic growth and possible recession.
A series of rate hikes and hawkish communication came against a backdrop of plummeting Chinese and European activity, new plans for Russian energy bans and continued supply-side pressures, warned analysts at Barclays.
This creates the gloomy prospect of persistent inflation forcing central banks to hike rates despite sharply slowing growth, the analysts said.
There was no let up in China’s zero COVID policy with Shanghai tightening the city-wide COVID lockdown of 25 million residents.
S&P 500 stock futures led the way with a drop of 0.6%, while Nasdaq futures shed 0.7%. U.S. 10-year bond futures also lost 8 points.
Nikkei futures were trading at 26,745 compared to a cash close of 27,003 on Friday.
Investors were also tense ahead of the U.S. consumer price report due on Wednesday where only a slight easing in inflation is forecast, and certainly nothing to prevent the Federal Reserve from hiking by at least 50 basis points in June. Indeed, core inflation is actually seen rising by 0.4% in April, up from 0.3% the previous month, even as the annual pace dips a bit due to base effects.
In Q1, the annualized monthly change in core CPI was 5.6%, noted analysts at ANZ. That is too high for the Fed and we think the FOMC won’t be relaxed about inflation until the core number moderates to around 0.2% m/m on a sustained basis.
They said: The Fed is not the only central bank facing inflation pressures. Increasingly, the guidance from the ECB is becoming a lot more hawkish.