Volkswacht Bodensee - Stocks fluctuate as traders fret over recession

Data showing a flare-up of fresh Covid-19 cases in China revived concerns about the government's policy of locking down towns and cities to eradicate the disease, despite the economic cost.

After the S&P 500's worst January-June since 1970, Wall Street got the second half off to a healthy start Friday as a below-forecast reading on US manufacturing provided hope banks will not go on an extended period of monetary tightening.

That followed a drop in confidence among consumers -- a key driver of the world's top economy.

However, National Australia Bank's Rodrigo Catril said the Federal Reserve and other global financial chiefs might not ease back on their rate hikes too soon as inflation remains stuck around multi-decade highs.

"While the data is suggesting a US economic slowdown is coming, we are not yet seeing signs of an ease in inflationary pressures, an important distinction given the Fed will continue with its aggressive tightening approach until it sees evidence of the latter," he said in a commentary.

In a sign of the struggle officials will have in controlling rising prices, figures showed eurozone inflation hit a record 8.6 percent in June. The European Central Bank is due to lift rates this month for the first time in more than a decade.

Still, while surging prices remain a huge problem, Chris Weston, at Pepperstone Group, said the psychology is "shifting radically from inflation concerns to one now where we're firmly focused on growth".

While New York provided a strong lead, Asia struggled.

Hong Kong dropped as investors returned from a long weekend to play catch-up with Friday's losses, while Seoul, Taipei, Bangok and Jakarta were also down.

However, Tokyo, Shanghai, Mumbai, Sydney, Singapore, Taipei and Wellington rose.

London, Paris and Frankfurt rose at the open, though US futures were in the red.

A rise in new Covid cases in China over the weekend weighed on sentiment among investors who fear a return to the painful lockdowns in major cities including Shanghai, which hammered the world's number two economy.

The country saw more than 700 new infections Saturday and Sunday, having held below 50 a day for the previous two weeks.

Macau saw its first two Covid deaths at the weekend and authorities said they would consider a city-wide lockdown to fight the disease. The comments sent Hong Kong-listed shares in Macau casinos plunging.

Oil prices edged up but concerns about recession weighed on sentiment as traders bet on a drop in demand, while the head of Asia at crude trading giant Vitol said he saw signs consumers were beginning to feel the pressure of high commodity costs.

"There's very clear evidence out there of economic stress being caused by the high prices, what some people refer to as demand destruction," said Mike Muller. It is "not just oil, but also liquefied natural gas".

- Key figures at around 0720 GMT -

Tokyo - Nikkei 225: UP 0.8 percent at 26,153.81 (close)

Hong Kong - Hang Seng Index: DOWN 0.2 percent at 21,825.32

Shanghai - Composite: UP 0.5 percent at 3,405.43

London - FTSE 100: UP 0.8 percent at 7,227.03

Dollar/yen: UP at 135.42 yen from 135.28 yen Friday

Pound/dollar: DOWN at $1.2095 from $1.2098

Euro/dollar: DOWN at $1.0423 from $1.0433

Euro/pound: DOWN at 86.15 pence from 86.21 pence

West Texas Intermediate: UP 0.4 percent at $108.85 per barrel

Brent North Sea crude: UP 0.5 percent at $112.15 per barrel

New York - Dow: UP 1.1 percent at 31,097.26 (close)

-- Bloomberg News contributed to this story --

O.Krause--BTB