World shares fell Monday after last week's decline on Wall Street, while signs of a surge in coronavirus infections in China suggested progress may be uneven as it rolls back its “zero-COVID” pandemic restrictions.
Attention was turning to an update on US consumer prices and the Federal Reserve's last meeting of the year.
The last big piece of data on inflation before the Fed's next decision is due Tuesday, when economists expect the consumer price index to show inflation slowed to 7.3 per cent last month from 7.7 per cent in October.
Meetings of major central banks including the Fed mean “there is potential for a whole load of volatility in markets; especially given the palpable tensions between inflation risks and fears of policy-induced recession," analysts at Mizuho Bank said in a commentary.
Germany's DAX lost 0.5 per cent to 14,295.91 and the CAC 40 in Paris shed 0.4 per cent to 6,653.29. Britain's FTSE 100 gave up 0.3 per cent to 7,453.26.
The futures for the S&P 500 and the Dow Jones Industrial Average edged 0.1 per cent lower.
China was setting up more intensive care facilities and trying to strengthen hospitals as it rolls back anti-virus controls that confined millions of people to their homes, crushed economic growth and set off protests.
The precautions come as the number of cases appeared to be rising, though a sharp reduction in the number of tests being administered makes measuring any changes difficult.
President Xi Jinping's government is officially committed to stopping virus transmission, the last major country to try. But the latest moves suggest the ruling Communist Party has decided to tolerate more cases without quarantines or shutting down travel or businesses as it winds down its “zero-COVID” strategy.
Hong Kong's Hang Seng sank 2.1 per cent to 19,475.16 and the Shanghai Composite index shed 0.9 per cent to 3,179.04.
Shares in e-commerce and other tech-related companies that thrived during the days of lockdowns as home deliveries soared were sharply lower. Meituan fell 7 per cent and Baidu also dropped 7 per cent. E-commerce giant Alibaba sank 3.8 per cent and JD.com lost 2.9 per cent.
Tokyo's Nikkei 225 index gave up 0.2 per cent to 27,842.33 after a survey of Japanese manufacturers released Monday showed a sharp deterioration in their outlook, with recession a growing possibility in the US and other major markets. The business survey index fell to minus 3.6 per cent in October-December from 1.7 per cent in the previous quarter as manufacturers grappled with high prices for energy and other raw materials.
The Kospi in Seoul lost 0.7 per cent to 2,373.02 and Australia's S&P/ASX 200 declined 0.5 per cent to 7,180.80.
Markets in Thailand were closed for a holiday.
A choppy day of trading on Wall Street ended with stocks broadly lower Friday.
The S&P 500 and Nasdaq composite each fell 0.7 per cent, while the Dow Jones Industrial Average dropped 0.9 per cent. Smaller company stocks fell even more, pulling the Russell 2000 index 1.2 per cent lower. The indexes marked their first losing week in the last three.
The S&P 500 finished 3.4 per cent lower for the week and is now down 17.5 per cent this year.
The US government reported that prices paid at the wholesale level were 7.4 per cent higher in November than a year earlier. That's a slowdown from October's wholesale inflation rate of 8.1 per cent, but it was still slightly worse than economists expected.
The Fed has been battling inflation by aggressively raising interest rates to raise the cost of borrowing and slow economic activity. The central bank has already hiked its key overnight rate to a range of 3.75 per cent to 4 per cent, up from basically zero as recently as March.
It is expected to raise rates by another half percentage point on Wednesday as it wraps up a two-day meeting.
Stocks have been battered this year by the withdrawal of pandemic stimulus and rising rates, which make other investments more attractive. They've recovered some of their losses recently, as inflation has slowed since hitting a peak in the summer. But price gains remain high, raising the risk the Federal Reserve will have to keep hiking interest rates sharply to get it fully under control.
In other trading Monday, US benchmark crude oil lost 21 cents to USD 71.81 per barrel in electronic trading on the New York Mercantile Exchange. It lost 44 cents to USD 71.02 on Friday.
Brent crude, the pricing basis for international trading, dropped 35 cents to USD 75.75 per barrel.
The US dollar rose to 136.88 Japanese yen from 136.60 yen. The euro rose to USD 1.0550 from USD 1.0537.
