Asian markets off to a shaky start as U.S. stocks slip on rate worries

Asian markets off to a shaky start as U.S. stocks slip on rate worries

A man wearing a protective mask walks past an electronic board showing the Shanghai Composite Index, Nikkei index and Dow Jones Industrial Average outside a brokerage in Tokyo amid the coronaviruses disease COVID 19 outbreak.

SYDNEY Reuters- Asian markets got off to a shaky start on Monday as U.S stock futures took a early skid on rate worries, while a tighter 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, according to analysts at Barclays.

The central banks are forced to hike rates because of the gloomy prospect of persistent inflation. There was no change to China's zero COVID policy with Shanghai tightening the city's COVID lockdown of 25 million residents.

The S&P 500 stock futures dropped 0.6%, while Nasdaq futures fell 0.7%. U.S. 10 year bond futures lost 8 ticks.

Nikkei futures were trading at 26,745 compared to a cash close of 27,003 on Friday.

The Federal Reserve hiked by 50 basis points in June after the U.S. consumer price report is due on Wednesday, where a slight easing of inflation is forecast.

In April, core inflation was up by 0.4%, up from 0.3% the previous month, even though the annual pace dips a bit due to base effects.

In Q1, the annualised monthly change in core CPI was 5.6%, according to analysts at ANZ. It 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.

The Fed is not the only central bank facing inflation pressures. The guidance from the ECB is becoming more hawkish. In July, Fed fund futures are priced for rates reaching 1.75 -- 2.0%, from the current 0.75 -- 1.0%, and will climb all the way to around 3% by the end of the year.

The diary is full of Fed speakers this week, which will give them plenty of time to keep up with the hawkish chorus.

The aggressive rate outlook saw the U.S. dollar reach 20 year highs on a basket of majors last week at 104.070, and it was last trading firm at 103.760.

The euro was stuck at $1.0534 and just a tad more than its recent lows of $1.0481, while the dollar was very much on control against the Japanese yen at 130.72.

Oil prices fell back a bit as the Group of Seven G 7 nations committed on Sunday to ban or phase out imports of Russian oil.

Russia celebrates Victory Day on Monday, amid speculation that President Vladimir Putin might declare war on Ukraine in order to call up reserves.