European stocks are seen opening mostly lower on Tuesday despite U.S. stocks finishing in positive territory overnight.
Risk sentiment remains fragile as elevated U.S. yields and crude oil prices fueled concerns about inflation and further rate hikes.
Chicago Fed President Austan Goolsbee said on Monday that high inflation remains the “biggest risk” to the economy and the Fed needs to have 100 percent commitment to get inflation back to the 2 percent target.
Separately, Minneapolis Federal Reserve Bank President Neel Kashkari said that rates probably have to go a little bit higher, and then be held higher for longer to cool things off.
The dollar held near 10-month highs against a basket of currencies and U.S. Treasury yields scaled a fresh 16-year peak as investors absorb hawkish messages from central bankers worldwide.
Gold was little changed while oil prices continued to fall from 10-month highs hit last week on concerns about energy demand and interest rates.
Asian markets retreated due to uncertainty about the Fed’s rate path and persistent concerns over a Chinese economic slowdown.
In economic releases, investors look ahead to the release of inflation data, due later in the week, which could influence the ECB’s next move.
The yield on the 10-year German Bund reached its highest level since 2011 on Monday after European Central Bank president Christine Lagarde repeated that rates will stay restrictive for as long as needed to curb inflation.
Trading later in the day may be impacted by reaction to the latest U.S. economic data, including reports on new home sales and consumer confidence.
Later in the week, the Commerce Department is due to release its report on personal income and spending for August, which includes readings on inflation said to be preferred by the Fed.
U.S. stocks rebounded overnight as investors looked for bargains following last week’s sell-off on concerns that interest rates will remain higher for longer.
Meanwhile, investors shrugged off Moody’s warning that a U.S. government shutdown would have negative implications for the country’s top tier credit rating.
The tech-heavy Nasdaq Composite rose half a percent, while the S&P 500 gained 0.4 percent and the Dow edged up 0.1 percent.
European stocks hit over one-month lows on Monday amid concerns about China’s property sector and sharply higher bond yields across the developed world.
The pan European STOXX 600 declined 0.6 percent. The German DAX lost 1 percent, France’s CAC 40 gave up 0.9 percent and the U.K.’s FTSE 100 shed 0.8 percent.
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