Stocks and commodities fell as a worsening Covid outbreak in China exacerbated fears of a more rapid tightening by the Federal Reserve.
The Stoxx50 Europe index fell more than 2%, with miners and energy companies at the forefront of losses. US stock futures fell and S&P 500 futures contracts dropped about 1% after the index lost 2.8% on Friday:
Fears of a wider lock-up in Beijing are scaring investors, who are already worried about the risk of a global slowdown as the Fed raises rates to tame inflation. China's broad-based stock index fell to its lowest level in almost two years as politicians sought to stem the outbreak in Shanghai amid the government's unwavering commitment to its Covid-zero policy.
Treasuries halted last week's fall, which has rattled markets, with the 10-year benchmark yield down 9 basis points. The dollar continued to strengthen as investors opted for safe havens.
EUR/USD dropped after Emmanuel Macron's victory, reaching a low for the year. In doing so, a key risk to the markets was eliminated.
Frederic Leroux, a member of Carmignac Gestion's strategic investment committee said that the markets had been expecting Macron to win, so they were already moving on. There are other concerns today, he added. He believes that inflation remains a key concern.
The inflation outlook continues to hang over the markets, even though a pullback in commodities may provide some respite. Fed's Jerome Powell outlined his boldest approach to curbing rising prices and the European Central Bank signalled a stronger tightening.
Palm oil prices rose after Indonesia's leading producer said it would ban all vegetable oil exports. This is an unexpected move that threatens to worsen global food inflation and exacerbate volatility in crop markets from the fighting in Ukraine.
The Moscow Exchange Index has fallen continuously for 15 consecutive days amid the promise of new commodity and banking sanctions.
This week's events:
- EIA oil stockpile report, Wednesday
- Australian CPI, Wednesday
- BoJ monetary policy decision, Thursday
- US Q1 GDP, weekly jobless claims, Thursday
- ECB releases its economic bulletin, Thursday
