The LONDON HONG KONG shares were lower as investors looked at the US inflation data and the dollar hung off recently highs on Tuesday, which will likely lead to further aggressive Federal Reserve hikes.
The broader Euro STOXX 600 fell 0.3 percent, after its best session in nearly two weeks on Monday, with German stocks down 0.4 percent. Miners and autos, among the top gainers a day earlier, led declines on Tuesday.
Michael Hewson, chief market analyst at CMC Markets, said the focus is on tomorrow's US 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 was mostly flat after blockbuster jobs data last week reinforced expectations that the Federal ReserveFederal Reserve will crack down on inflation, while a revenue warning from chipmaker Nvidia reminded investors of a slowing US economy.
The consumer price data will be released to investors to gauge whether the Fed will ease slightly in its inflation fight and give a better footing for the economy to grow.
The dollar was just below its recent high, 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 percent.
After giving up modest gains, the broadest index of Asia-Pacific shares outside Japan was flat. Japan's Nikkei fell 0.95 percent, hit 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 on Monday showing consumers' inflation expectations fell sharply in July.
That will be music to the ears of the Fed since if that trend continues, it means that the Fed may not have to be so aggressive in hiking rates, according to Deutsche Bank analysts.
One of the big fears is that higher inflation expectations will lead to a self-fulfilling prophecy of higher actual inflation. Policymakers were also concerned with inflation. The Jackson Hole central banking symposium will feature a lot of soaring prices across the globe this month, and it's likely that it will be top of the agenda.
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 to tackle inflation pressures that are gaining a foothold in Britain's economy.
It is down more than 10 percent against the dollar this year.
Oil prices fell after their biggest weekly drop since April 2020 due to worries about stalling global demand as central banks keep tightening.
The US crude was down $1 a barrel, or 0.7 percent, at $90.07 a barrel. Brent crude fell 0.8 percent to $95.91 per barrel.