Morning Chronicle - Global stocks mostly fall ahead of key US inflation data

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Global stocks mostly fall ahead of key US inflation data
Global stocks mostly fall ahead of key US inflation data / Photo: ANDRE PAIN - AFP/File

Global stocks mostly fall ahead of key US inflation data

Global stock markets mostly fell Monday as investors digested fresh Covid-19 restrictions in China and braced for a key US inflation report, while the dollar strengthened against other currencies.

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The euro continued to head towards parity against the dollar as the European Commission said it would again cut its growth forecast for the current year and hike expectations for inflation.

"It is no longer a question of if euro-dollar will fall to one, but more a question of how quickly and will it stop there," City Index analyst Fiona Cincotta told AFP.

"With energy security concerns rising by the day in Europe, a recession seems almost impossible to avoid," the expert said.

At the same time, Friday's strong US jobs report meant that an interest hike of a full percentage point "can't be discounted," Cincotta said.

"The diverging economic outlooks and the significantly more hawkish Fed means that euro-dollar could comfortably fall below parity," she said.

This week's calendar includes the key US consumer price index reading for June, which will be scrutinized for clues about whether the Federal Reserve's aggressive moves to tighten monetary policy will need to be extended.

OANDA analyst Craig Erlam felt it was "only a matter of time" until euro-dollar hits parity.

While the European Central Bank is readying to raise interest rates for the first time in 11 years, "It's offering little support for the single currency as any hikes will simply compound the economic misery at this point," the analyst said.

- China growth fears -

The prospect of another coronavirus lockdown sparked an equities sell-off in Hong Kong and Shanghai on Monday.

Hong Kong-listed casino operators were sharply lower after officials in Macau embarked on a week-long lockdown to curb its worst coronavirus outbreak.

There were also losses in Sydney, Seoul, Taipei, Manila, Mumbai, Jakarta and Wellington.

Shanghai recorded more than 120 virus cases at the weekend, having seen its first one of the highly contagious BA.5 Omicron strain, forcing officials to launch another mass testing drive.

With China fixated on its zero-Covid strategy, there is increasing concern that authorities will revert to another painful lockdown. Shanghai residents only emerged from a two-month confinement in June.

There have meanwhile been new infections uncovered in other parts of the country, including Beijing.

However, Tokyo rose as traders welcomed Japan's ruling bloc securing a strong win in Sunday's upper house election, held days after the assassination of former premier Shinzo Abe.

The result should provide the government with some stability, while there were also hopes for a cabinet reshuffle and economic stimulus.

Back on Wall Street, stocks closed firmly lower, with the S&P 500 shedding 1.2 percent.

Twitter sank more than 11 percent in the first session since Tesla Chief Executive Elon Musk notified the company he was withdrawing a $44 billion bid to acquire the social media platform.

- Key figures at around 2130 GMT -

New York - Dow: DOWN 0.5 percent at 31,173.84 (close)

New York - S&P 500: DOWN 1.2 percent at 3,854.43 (close)

New York - Nasdaq: DOWN 2.3 percent at 11,372.60 (close)

London - FTSE 100: UNCHANGED at 7,196.59 (close)

Frankfurt - DAX: DOWN 1.4 percent at 12,832.44 (close)

Paris - CAC 40: DOWN 0.6 percent at 5,996.30 (close)

EURO STOXX 50: DOWN 1.0 percent at 3,471.69 (close)

Tokyo - Nikkei 225: UP 1.1 percent at 26,812.80 (close)

Hong Kong - Hang Seng Index: DOWN 2.8 percent at 21,124.20 (close)

Shanghai - Composite: DOWN 1.3 percent at 3,313.58 (close)

West Texas Intermediate: DOWN 0.7 percent at $104.09 per barrel

Brent North Sea crude: UP 0.1 percent at $107.10 per barrel

Euro/dollar: DOWN at $1.0041 from $1.0185 on Friday

Pound/dollar: DOWN at $1.1892 from $1.2033

Euro/pound: DOWN at 84.38 pence from 84.65 pence

Dollar/yen: UP at 137.41 yen from 136.10 yen