San Francisco Frontiers - Stock markets continue retreat on rate hike fears

Wall Street was trading down following steeper drops in Europe. Asian markets were also down, though Tokyo bucked the trend.

The US Federal Reserve jolted investors last week as it pressed pause on its rate-hike campaign but also suggested that one more increase was possible before the end of the year, with fewer cuts than anticipated in 2024.

The European Central Bank lifted its main rate to a record high earlier this month.

While the ECB also signalled that it might be the last hike for this current cycle, there are no indications of when it might start cutting borrowing costs.

French central bank governor Francois Villeroy de Galhau said Monday that the current level of rates must be "maintained for a sufficiently long duration" to bring inflation back to the ECB's target of two percent inflation.

While the ECB governing council member said the Frankfurt-based organisation could hike again if necessary, he warned against doing "too much" as it could tip the eurozone economy into recession.

- 'Fragile' sentiment -

A recent spike in oil prices to 10-month highs above $90 a barrel is adding to the headache for central bankers, with observers warning the commodity could push above $100 owing to an output cut by Saudi Arabia and Russia.

Crude prices rose slightly before sliding through Monday afternoon, while the dollar gained against other major currencies.

The yen touched its lowest level since last October against the dollar on Monday, weighed down by the determination of the Japanese central bank to continue its ultra-loose monetary policy, which makes the currency less attractive to investors.

Adding to the downcast mood, a closely-watched survey on Monday showed that business sentiment fell for a fifth consecutive month in September in Germany, Europe's biggest economy.

"Sentiment still remains fragile with higher-for-longer messages (on interest rates) reverberating through the markets," said Redmond Wong, market strategist at Saxo Capital Markets.

He added that buying could be subdued also by the possibility of a US government shutdown and the ongoing strike by the United Auto Workers.

In Hong Kong, worries about China's property sector returned as shares in struggling developer China Evergrande tumbled about 25 percent after it called off a creditor meeting and said it had scrapped a planned restructuring.

On Wall Street, Amazon shares bounced after it said it would invest up to $4 billion in AI firm Anthropic, as the online retail giant steps into a race centred on artificial intelligence and dominated by Microsoft, Google and OpenAI.

"Markets have struggled in recent weeks amid concerns over rising oil prices and bond yields, subdued economic activity across the global manufacturing sector and still-high inflation in major developed economies," said Fawad Razaqzada, analyst at Forex.com and City Index.

"As a result, investors have lost appetite for taking on too much risk," he said.

- Key figures around 1540 GMT -

New York - Dow: DOWN 0.2 percent at 33,780.6 points

EURO STOXX 50: DOWN 1.0 percent at 4,167.37

London - FTSE 100: DOWN 0.8 percent at 7,623.99 (close)

Frankfurt - DAX: DOWN 1.0 percent at 15,405.49 (close)

Paris - CAC 40: DOWN 0.9 percent at 7,123.88 (close)

Tokyo - Nikkei 225: UP 0.9 percent at 32,678.62 (close)

Hong Kong - Hang Seng Index: DOWN 1.8 percent at 17,729.29 (close)

Shanghai - Composite: DOWN 0.5 percent at 3,115.61 (close)

Euro/dollar: DOWN at $1.0589 from $1.0647 on Friday

Pound/dollar: DOWN at $1.2210 from $1.2240

Dollar/yen: UP at 148.83 yen from 148.36 yen

Euro/pound: DOWN at 86.72 pence from 86.96 pence

Brent North Sea crude: DOWN 0.4 percent at $91.54 per barrel

West Texas Intermediate: DOWN 0.3 percent at $89.58 per barrel

burs-rox/cw

H.King--SFF