Volkswacht Bodensee - Markets waver, oil falls on weak Chinese data, looming US rate hike

Equities kicked off the month of May on the wrong foot after Wall Street finished a tough April by closing sharply down on Friday following disappointing results from tech giant Amazon.

"The markets remain skittish regarding an expected aggressive Fed monetary policy tightening cycle as the Central Bank is set to hike rates this week," said analysts at Charles Schwab investment firm.

"Moreover, global sentiment continues to be hampered by the ongoing war in Ukraine, the recent spike in interest rates, the rallying US dollar, and slowing economic activity in China," they said.

Wall Street seesawed in early deals.

Eurozone markets were down sharply in afternoon trading, with Paris almost two percent lower and Frankfurt tumbling 1.3 percent. London was closed for a bank holiday.

Tokyo, Seoul, Mumbai, Manila, Sydney and Wellington all finished lower. Hong Kong and mainland Chinese markets were closed along with several other Asian markets.

Data at the weekend showed Chinese manufacturing activity shrank last month at its fastest pace since the start of the pandemic as the government applies Covid-19 lockdowns in the biggest cities of the world's second biggest economy.

While economic hub Shanghai remains locked down, Beijing has tightened virus controls in the capital, requiring clear Covid tests to visit public spaces.

This followed gloomy economic data in Europe on Friday showing that Russia's invasion of Ukraine was weighing on growth.

The struggles in China, the world's biggest crude importer, led to a drop in prices of the commodity on demand concerns, offsetting worries about tighter supply as the EU eyes a ban on Russian oil over its invasion of Ukraine.

Oil prices fell more than three percent, with Brent North Sea crude, the benchmark international contract, falling to $103.71.

The European Commission is preparing a sanctions text that could be put to the 27 member states as early as Wednesday, sources said, adding that the ban would be introduced over six to eight months to give countries time to diversify their supply.

- Rate hike looms large -

Investors are also looking ahead at the US Federal Reserve's two-day policy meeting, which starts Tuesday and is expected to see the central bank hike borrowing costs by half a point -- the most since 2000 -- to tame soaring consumer prices.

Some analysts are predicting the Fed could even announce a three-quarter-point increase at some point as it battles more than 40-year-high inflation.

With some commentators warning rates could go as high as three percent, there are also worries the Fed could be too heavy handed and tip the US economy into recession.

"The Fed must make up for lost time and act quick and strongly as it faces inflation which keeps surprising as it rises," said Franck Dixmier, head of fixed income at Allianz Global Investors.

"The challenge in executing the normalisation of its monetaryt policy is to ensure a soft landing of the US economy ... while maintaining a dynamic labour market and above all avoiding triggering a recession," he said.

- Key figures at around 1400 GMT -

New York - Dow: UP 0.2 percent at 33,045.26 points

Frankfurt - DAX: DOWN 0.8 percent at 13,987.69

Paris - CAC 40: DOWN 1.5 percent at 6,438.19

EURO STOXX 50: DOWN 1.6 percent at 3,743.16

London - FTSE 100: Closed for a holiday

Tokyo - Nikkei 225: DOWN 0.1 percent at 26,818.53 (close)

Hong Kong - Hang Seng Index: Closed for a holiday

Shanghai - Composite: Closed for a holiday

Euro/dollar: DOWN at $1.0530 from $1.0550 on Friday

Pound/dollar: DOWN at $1.2545 from $1.2578

Euro/pound: UP at 83.91 pence from 83.86 pence

Dollar/yen: UP at 130.03 yen from 129.89 yen

West Texas Intermediate: DOWN 3.5 percent at $101.04 per barrel

Brent North Sea crude: DOWN 3.2 percent at $103.71 per barrel

J.Bergmann--BTB