LONDON HONG KONG shares fell as investors looked at U.S. inflation data and the dollar hung off recent highs on Tuesday, which will likely yield clues to any further aggressive Federal Reserve hikes.
After hitting its best session in nearly two weeks on Monday, the Euro STOXX 600 fell 0.3 per cent, with German stocks down 0.4 per cent. On Tuesday, miners and autos, among the top gainers, led declines.
Michael Hewson, chief market analyst at CMC Markets said the focus is on tomorrow's U.S. inflation numbers and whether or not they are likely to show signs of a softening of inflationary pressures.
Are we near the peak, and will tomorrow's CPI numbers reflect that? Wall Street closed mostly flat on Monday, after blockbuster jobs data reinforced expectations that the Federal ReserveFederal Reserve will crack down on inflation, while a revenue warning from chipmaker Nvidia reminded investors of a slowing U.S. economy.
The consumer price data will be released to investors to see whether the Fed will ease slightly in its inflation fight and give investors a better footing for the economy to grow.
The dollar was just below its recent peak, with traders wary of a surprise that could cause more upward pressure on interest rates. The dollar was flat against a basket of currencies, at 106.30.
The MSCI world equity index, which tracks shares in 47 countries, fell 0.1 per cent.
MSCI's broadest index of Asia-Pacific shares outside Japan was flat earlier in the day, after giving up modest gains. Japan's Nikkei slid 0.95 per cent, hurt by weak quarterly earnings by heavyweights, and lowered expectations for the video game market.
There were some encouraging signs for the Fed on the prices front, with a New York Fed survey showing consumers' inflation expectations fell sharply in July.
If that trend continues, it will be music to the ears of the Fed, since it means that the Fed may not have to be so aggressive in hiking rates, according to Deutsche Bank analysts.
One of their biggest fears is that higher inflation expectations will lead to a self-fulfilling prophecy of higher actual inflation. Inflation was also on the minds of policymakers. Soaring prices across the globe are likely to be on the agenda at the Jackson Hole central banking symposium later this month.
BoE Deputy Governor Dave Ramsden said that the Bank of England will probably have to raise interest rates further from their current 14 year high in order to tackle inflation pressures that are gaining a foothold in Britain's economy.
It is down more than 10 per cent against the dollar this year.
Oil prices fell after suffering their biggest weekly drop since April 2020 due to worries about stalling global demand as central banks keep tightening.
U.S. crude was down $1 a barrel, or 0.7 per cent, at $90.07 a barrel. The price of crude fell by 0.8 per cent to $95.91 per barrel.