Fed hike fears, Jackson Hole in focus

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London Stock Exchange

Toby Melville | Reuters

The pan-European Stoxx 600 was down 0.8% by early afternoon, with autos falling 3% to lead losses as most sectors and major bourses traded in negative territory. Oil and gas shares bucked the trend to add 0.8%.

Risk sentiment was dampened by hawkish signals from ECB policymakers, with Bundesbank President Joachim Nagel telling a German newspaper that the ECB must continue hiking interest rates even as recession risks in Germany grow.

Minutes from the ECB’s most recent policy meeting will be published Thursday, while investors will be paying close attention to euro zone flash PMIs due on Tuesday.

Shares in Asia-Pacific were mixed on Monday as caution prevailed, though Chinese markets rose after China’s central bank cut its benchmark lending rates.

U.S. stock futures fell in early premarket trade after the S&P 500 snapped a four-week winning streak on Friday, as Wall Street looks ahead to Fed Chairman Jerome Powell’s Friday comments on inflation at the central bank’s annual Jackson Hole economic symposium.

“We expect the market to approach the Fed’s Jackson Hole meeting fearing a hawkish message that could drive a sharp risk-off move. However, we think the message will be more nuanced, and possibly even reassuring,” said Steve Englander, head of global FX research and North America macro strategy at Standard Chartered.

“For the Fed, getting inflation down towards targets is non-negotiable. Chair Powell is likely to state that the Fed will raise rates as far as it takes, and for as long as it takes, to lower inflation.”

There are no major corporate earnings or economic data releases due out of Europe on Monday.

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