Stocks in Asia are set to open on Tuesday as investors remain cautious about whether central banks can raise interest rates to contain inflation without derailing growth. Oil gained after the European Union backed a campaign to ban some Russian oil.
Futures fell slightly in Japan, Australia and Hong Kong. US contracts rose after European stocks rose. US markets were closed on Monday for the Memorial Day holiday.
Crude oil hit around $117 a barrel after EU leaders agreed to pursue a partial ban on Russian oil in response to the invasion of Ukraine.
Higher energy and food costs are keeping upward pressure on prices globally and squeezing consumers. European bonds fell after German inflation hit a record high, adding pressure on central bank policymakers to rein in rising prices. The dollar slipped for a third day.
In China, purchasing managers’ indices for May are expected to show services and manufacturing activity continuing to contract amid Covid lockdowns, despite progress in containing the virus and resuming production in China. some factories in Shanghai, according to Bloomberg Economics.
Global equities are on track to end the month with modest gains amid skepticism over whether the market is near a bottom and volatility remains elevated. Fears that the central bank’s interest rate hikes could induce a recession, stubbornly high inflation and uncertainty over how China will stimulate its faltering economy are keeping investors on their toes.
“The mood is temporarily better in the markets,” Chris Iggo, chief investment officer for core investments at AXA Investment Managers, said in a note. “I think the worst is over for bond markets, but it’s harder to bottom out in equities. Iggo said another 10-15% drop in equity markets couldn’t be ruled out.
German inflation hit a new all-time high, adding urgency to the European Central Bank’s exit from crisis stimulus after figures out of Spain also topped economists’ estimates. The reports came 10 days before a crucial ECB meeting where officials are expected to announce the conclusion of large-scale asset purchases and confirm plans to raise interest rates in July for the first time. in over a decade.
In the United States, Federal Reserve Governor Christopher Waller has said he wants to keep raising interest rates in half-percentage-point increments until inflation returns to zero. objective of the central bank.
Meanwhile, Chairman Joe Biden will hold a rare Oval Office meeting with Fed Chairman Jerome Powell on Tuesday amid the highest inflation in decades and ahead of U.S. payrolls numbers. later this week.
Elsewhere, Bitcoin was back above $30,000 as investors and strategists said the digital currency showed signs of bottoming out.
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