European Shares Set For Weak Start Amid Recession And Rate Hike Worries

European stocks look set to open on a sluggish note Monday as recession and rate-hike worries sapped investors’ appetite for riskier assets.

Asian markets were mixed, with Chinese and Hong Kong markets trading in positive territory, after China’s central bank cut its key lending rates again in a bid to boost the economy hurt by extended COVID-19 lockdowns and property debt problems.

Unease over China’s economy tipped the yuan to its lowest level in nearly two years.

The euro sank to a five-week trough after Russia announced a three-day halt to European gas supplies via the Nord Stream 1 pipeline at the end of this month, exacerbating the region’s energy crisis.

Bundesbank President Joachim Nagel told German newspaper Rheinischen Post that inflation in Germany could hit a 70-year high of 10 percent this fall as Russian natural-gas supplies slow.

A recession appears likely next winter but the European Central Bank should continue increasing rates to tame inflation, he added.

Benchmark 10-year U.S. Treasury yields came within a whisker of 3 percent after Richmond Fed President Thomas Barkin said on Friday that the “urge” among central bankers was towards faster, front-loaded rate increases.

Gold hit over three-week low on dollar strength, while oil prices fell over 1 percent in Asian trade on demand concerns and amid ongoing discussions to revive the 2015 Iran nuclear deal.

Reports on U.S. durable goods orders, new home sales and Q2 GDP will be in the spotlight this week as investors await additional cues on the economic and interest-rate outlook.

The personal income and spending report due Friday is likely to attract particular attention, as it includes a reading on inflation said to be preferred by the Fed.

The highly-anticipated speech from the Fed Chair at the Jackson Hole symposium will provide further insights into the Fed’s thinking on rates and inflation.

U.S. stocks ended lower on Friday amid rising recession risks and uncertainty over the Fed’s rate-hiking path.

The tech-heavy Nasdaq Composite tumbled 2 percent and the S&P 500 gave up 1.3 percent to snap four-week winning streaks while the Dow closed 0.9 percent lower.

European stocks declined on Friday on concerns about slowing economic growth, soaring inflation and prospects for tighter monetary policy.

The pan European Stoxx 600 fell 0.8 percent. The German Dax fell 1.1 percent and France’s CAC 40 index shed 0.9 percent while the U.K.’s FTSE 100 inched up 0.1 percent.

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