Asian stocks sank on Monday, while the dollar rose as markets braced for a flurry of rate announcements from the U.S. Federal Reserve, the European Central Bank, and others.
The Federal Reserve is largely expected to raise interest rates by 50 basis points at its last meeting of 2022 on Wednesday, while attention will also be focused on the central bank's new economic estimates and Fed Chair Jerome Powell's press conference.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 1% after rising 1.3% the previous week, buoyed by hopes that China's zero-COVID policy is finally being phased out.
Blue-chip shares in China fell 0.5%, while Hong Kong's Hang Seng index fell 1%, as investors focused on a rapid wave of COVID-19 infection affecting the economy.
The Nikkei 225 index in Japan fell 0.3%. The S&P 500 futures fell 0.2%, while the Nasdaq futures fell 0.3%.
On Friday, Wall Street fell, Treasury yields rose, and the dollar recovered some of its earlier losses.
The tone for the week's markets will be set by the release of the U.S. consumer price index (CPI) on Tuesday. Economists expect core annual inflation to fall to 6.1% in November, down from 6.3% the previous month.
The risk is on the upside after data on Friday showed producer prices rose faster than expected, raising concerns that the CPI report will show inflation is sticky and interest rates will have to stay higher for longer.
In addition to the Fed, the European Central Bank and the Bank of England are expected to raise interest rates, as policymakers continue to stifle growth in order to combat inflation.
In currency markets, the U.S. dollar rose 0.1% against a basket of currencies to 105.17, though it was still close to its five-month low of 104.1 a week ago.
Sterling sank 0.35% to $1.222, while the Australian dollar slipped 0.5 per cent to $0.6759.
On Monday, Treasury yields remained basically unchanged. The yield on benchmark 10-year Treasury notes held at 3.5820%, compared with its U.S. close of 3.5670%. The two-year yield struck 4.3527%, up marginally from its US finish of 4.330%
Prices in the oil market increased after dropping on Friday to their lowest point of the year due to concerns about a global recession.
