Volkswacht Bodensee - Asian markets drop on rate fears as US inflation runs hot

The report on the personal consumption expenditures price index followed blockbuster jobs figures and data showing prices coming down slower than hoped.

This month's readings have wiped out optimism that the Fed will be able to soon pause its monetary tightening and possibly cut borrowing costs before the end of the year.

Traders will be keeping a close eye on comments from bank officials this week.

"We have six voting members on the (policy board) scheduled to appear this week -- ample opportunity for officials to air their views on the latest data and, more importantly, the implications for their policy outlooks," said SPI Asset Management's Stephen Innes.

"But given the rude health of the US economy and with inflation flames reigniting, it's challenging to envision Fed commentary veering in anything but a more hawkish direction.

"Hence it could be difficult for the market to find much comfort this week unless the sentiment data surprises to the downside."

Some figures have already suggested they are open to hiking by 50 basis points at the next gathering, and several said they saw room for further tightening after Friday's data release.

All three main indexes on Wall Street ended deep in the red Friday, and Asia followed suit on Monday.

Hong Kong, Tokyo, Sydney, Shanghai, Seoul, Singapore, Manila, Jakarta and Wellington were all in the red.

Chris Weston, of Pepperstone Group, said in a note: "The clouds of uncertainty remain with us -- the market's consensus view that inflation would head lower through the year has clearly been challenged."

The prospect of more Fed rate hikes sent the dollar surging against its peers Friday and it held those gains in Asian business, sitting at a two-year high versus the yen.

Adding to the yen's weakness were comments from the man expected to take over as head of the Bank of Japan indicating he will maintain an ultra-loose monetary policy for now.

That came even as data showed inflation at a four-decade high.

Kazuo Ueda is due to talk to lawmakers again Monday, and traders will be poring over his remarks for more insight into his plans for taming inflation and boosting the torpid economy.

- Key figures around 0230 GMT -

Tokyo - Nikkei 225: DOWN 0.2 percent at 27,405.37 (break)

Hong Kong - Hang Seng Index: DOWN 0.2 percent at 19,979.12

Shanghai - Composite: DOWN 0.1 percent at 3,264.37

Dollar/yen: DOWN at 136.17 yen from 136.46 yen on Friday

Euro/dollar: UP at $1.0558 from $1.0552

Pound/dollar: UP at $1.1958 from $1.1938

Euro/pound: UP at 88.31 pence from 88.30 pence

West Texas Intermediate: UP 0.1 percent at $76.40 per barrel

Brent North Sea crude: UP 0.1 percent at $82.88 per barrel

New York - Dow: DOWN 1.0 percent at 32,816.92 (close)

London - FTSE 100: DOWN 0.4 percent at 7,878.66 (close)

C.Meier--BTB