LONDON: US and European stock markets fell Monday as investors already fretting over a looming interest rate hike await all-important US inflation numbers later in the week.
Traders have been on edge since the US Federal Reserve signalled last week that it was ready to raise interest rates sooner than expected to tame runaway prices.
"The markets are feeling the pinch of last Friday's jobs report which boosted the hawkish Fed expectations," said market analyst Ipek Ozkardeskaya at Swissquote.
"We see amplified outflows from the stocks that are particularly sensitive to higher rate prospects," she added. "In this respect, Nasdaq is down 2.5 percent."
The tech-heavy Nasdaq recovered part of the ground to stand down 1.7 percent in late morning trade. The Dow Jones Industrial Average down 1.1 percent and the S&P 500 1.3 percent.
In Europe, London finished the day down 0.5 percent, while Frankfurt shed 1.1 percent and Paris fell 1.4 percent.
Stock markets had mostly fallen on Friday after US data showed fewer new jobs than expected were created last month even as wages saw strong gains.
With the unemployment rate also falling, many investors looked at the data as an indication employers are having difficulty hiring and wage pressures are building.
Fed officials are now faced with the problem of having to adjust monetary policy to rein in prices while at the same time avoid damaging the economic recovery and causing a panic on markets as the cheap cash that has fuelled a near-two year rally dries up.
The bank has already started tapering its vast bond-buying programme put in place at the start of the pandemic and has signalled it could start lifting interest rates from record lows from March, with some observers predicting three hikes this year.
There were also indications officials were considering reducing its massive bond holdings, putting further upward pressure on lending costs.
The yield on 10-year Treasuries, a key indicator of future interest rates, climbed last week at its fastest pace in almost a year.
The International Monetary Fund warned that emerging economies should prepare for possible rough times as the Fed prepares to hike rates and Covid continues to hit global growth.
Investors will now be keeping a watch on inflation readings out of both the United States and China this week as they try to assess the outlook for the global economy with rocketing energy costs and supply snarls compounding problems caused by the fast-spreading Omicron Covid variant.
In other markets, oil prices were lower as traders mulled the supply-side impact of ongoing unrest in Kazakhstan, a member of the enlarged OPEC+ producers' grouping.
Following a record year in 2021, bitcoin -- the world's biggest cryptocurrency -- fell below the $40,000 mark on Monday, its lowest level since September -- before scrambling back above that level in later trading.
Video game publisher Take-Two announced a $12.7 billion deal to acquire Zynga in a transaction that will combine the creators of "Grand Theft Auto" and "Farmville".