European Shares Set To Extend Losses On Risk Aversion

European stocks are set to follow Asian peers lower on Monday as a higher-than-expected U.S. inflation print and troubling COVID-related updates from China triggered a bout of risk aversion.

The Japanese yen hit its lowest level against the dollar since 1998 and U.S. 10-year treasury yields rose above 3 percent for the first time in three years amid expectations of half-point Fed rate hikes this week and again in July and September.

The next Fed policy decision comes on Wednesday and the policy statement will contain updated projections for economic growth, the unemployment rate, inflation, and future interest rates.

The Bank of England and the Swiss National Bank are also expected to raise interest rates at their meetings this week, but little change is expected from the Bank of Japan.

Asian markets followed Wall Street lower on fears that aggressive Fed tightening could plunge the U.S. economy into a recession in 2023. A COVID warning from Beijing also added to concerns about global growth.

Gold slipped from a one-month high while oil prices slipped more than $2 on Chinese demand concerns.

Monthly GDP and foreign trade data from the U.K. will be out later in the day, headlining a light day for the European economic news.

U.S. stocks closed out their worst week since January with a third straight losing session Friday, as an unexpected jump in inflation added to concerns about faster policy tightening and an impending recession.

Data showed the annual rate of consumer price growth accelerated to 8.6 percent in May from 8.3 percent in April, showing the biggest surge since December 1981.

A measure of U.S. consumer sentiment plunged in early June to the lowest on record, adding to the downbeat sentiment.

The Dow lost 2.7 percent, the tech-heavy Nasdaq Composite plunged 3.5 percent and the S&P 500 tumbled 2.9 percent.

European stocks also closed sharply lower on Friday amid inflation concerns and news of renewed lockdowns in parts of China’s two largest cities.

The pan European Stoxx 600 plummeted 2.7 percent. The German DAX declined 3.1 percent, France’s CAC 40 index gave up 2.7 percent and the U.K.’s FTSE 100 shed 2.1 percent.