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INFLATION FEARS, ECONOMIC SLOWDOWN WEIGH ON STOCKS (0748 GMT)
The pan European index is down to a three-month low as a sharp rise in U.S. inflation raised concerns about aggressive interest rate hikes by the Fed.
Meanwhile, UK shares hit their lowest level in more than three weeks after data showed Britain's economy unexpectedly shrank in April, adding to economic growth worries ahead of a Bank of England policy meeting this week.
The pan-European STOXX 600 index is down 1.5%, with economic growth sensitive sectors among top fallers.
The blue-chip FTSE 100 index tumbles 1%, touching their lowest levels since May 19, while the domestically-focussed mid-cap FTSE 250 index declined to a one-month low, down 2.2%.
The BoE is expected to raise interest rates by 25 basis points to 1.25% as it battles red-hot inflation.
(Joice Alves)
WHO WANTS TO BE A CENTRAL BANKER? (0730 GMT)
A half-point U.S. Fed interest rate rise was always a done deal for Wednesday, but with annual inflation rising at the fastest since 1981, expectations are growing of a 75 basis-point move, either this month, or at one of the bank's upcoming meetings.
That's sent two-year Treasury yields to 15-year highs at almost 3.2%, having jumped 40 bps last week. The dollar has surged back to four-week peaks.
But the combo of inflation and central bank action is tightening the screws on the economy, sending U.S. consumer sentiment to a record low in early-June.
With the 2-year/10-year Treasury yield curve back on track for inversion, recession warnings are flashing.
The Fed is not the only game in town this week, with policy meetings scheduled in Britain, Japan and Switzerland. The Bank of England, particularly, has its work cut out, after Monday's data showed GDP shrank in April.
Near-10% inflation (exacerbated by sterling weakness) will force the Bank of England stick to plans for a 25 bps rate hike on Thursday, but navigating the inflation-growth dilemma may prove trickier than elsewhere.
Given inflation angst has transformed hitherto-dovish policymakers into hawks, more surprises may loom; the Swiss National Bank may decide on Thursday it's time for a hawkish pivot and Sweden may spring a half-point rate rise on Friday .
And Japan? The yen is at 24-year lows beyond 135.20 per dollar, despite last week's joint government-central bank statement that raised expectations of currency intervention.
What would really stem yen decline is a softer Bank of Japan line on yield curve control.
But there's no such pivot yet; the BOJ plans to buy 500 billion yen ($3.70 billion) of government bonds on Tuesday to keep 10-year yields within 0.25 percentage points around 0% .
Throw in Beijing's new "ferocious" COVID-19 outbreak and global recession increasingly seems like a done deal .
European and U.S. shares are looking at a dour session ahead and world stocks are at the lowest in three weeks.
Key developments that should provide more direction to markets on Monday: - Oil falls, spooked by Beijing COVID warning and inflation -French President Emmanuel Macron has a razor-thin edge over the left, first parliament elections show -ECB policymakers Robert Holzmann and Luis de Guindos speak
COVID-19, CHINA COVID MEASURES KNOCK FUTURES (0630 GMT)
European futures are pointing to a start of the day in the red for bourses across the region mirroring Asia stocks, which fell on the back of red-hot U.S. inflation and a COVID-19 warning from Beijing.
Worries that rising inflation will encourage the Fed to act with even more aggressive policy tightening has pushed European futures down 1.8%.
Spurring concern of more growth-strangling lockdowns, Beijing's most populous district of Chaoyang announced on Sunday three rounds of mass testing to quell a "ferocious" COVID-19 outbreak that emerged at a bar in a nightlife and shopping area last week.
In the meantime, Britain's economy unexpectedly shrank in April, official figures showed on Monday, three days before the Bank of England announces the scale of its latest interest rate response to the surge in inflation.
(Joice Alves)
