European stocks fall on supply chain disruption fears

European stocks started the week lower as the yen fell to a new 24-year low against the dollar as markets embraced caution ahead of US inflation data.

The Stoxx Europe 600 regional index fell 1.5% in early trading after sharp drop in the stock market in China due to new Covid-19 restrictions that heightened fears of further disruption to global supply chains. The German Dax fell 1.4%.

Futures markets showed that the Wall Street S&P 500 stock index, which rose last week after its worst first half in more than five decades, will fall 0.9% in initial trading in New York.

The dollar gained 0.6% against the yen to 137 yen, according to US forecasts. consumer price inflation is accelerating to an annual rate of 8.7% in June fueled expectations that the Federal Reserve will continue to aggressively raise interest rates.

Market forecasts for how high the Fed will take borrowing costs rose on Friday after the monthly nonfarm payrolls report showed that the US employers added 372,000 workers last month, compared to average forecasts of 265,000.

“Following the robust employment data, it is very clear that the Fed will have a mandate to raise interest rates aggressively,” said Caterina Cosmopoulou, partner at J Stern & Co. investment manager.

The Fed raised the funds rate by 0.75 percentage points in June, the biggest rate hike since 1994, to a target range of 1.50% to 1.75%, and said it would again aggressively raise rates at its July meeting .

Tokyo’s Topix rose 1.4% on Monday after Bank of Japan Governor Haruhiko Kuroda warned of “very high uncertainty” for the domestic economy, a strong signal that the central bank will continue to ignore the global upward trend in interest rates.

In addition to advancing against the yen, the dollar also rose to near parity with the euro, reflecting bets that the European Central Bank will resist an overly harsh response to record inflation as Russia’s invasion of Ukraine raises recession risks in Europe. Eurozone. On Monday, the euro fell 0.6% to $101.25.

Futures pegged to TTF, the European benchmark for natural gas prices, fell 6% to €160 per MWh on Monday morning. Its price has doubled since the beginning of June as fears have intensified that Russia will cut gas supplies to the continent.

Hong Kong’s Hang Seng equities fell 3.1% and mainland China’s CSI 300 fell 1.8% after cities across China reintroduced coronavirus restrictions to combat the spread of highly contagious AD. 5 A subvariant of the Omicron coronavirus.

The Beijing government has refused to approve foreign coronavirus vaccines as Chinese scientists rush to develop a homegrown messenger RNA shot.

Elsewhere, Brent crude fell 1.4 percent to $105.58 a barrel.

The yield on benchmark 10-year US Treasury bonds, which underlie debt pricing worldwide, fell 0.02 percentage points to 3.08% from about 2.8% early last week.