European stock indexes fell from recent record highs on Monday, and Wall Street looked set for losses, with traders grappling with an uncertain economic outlook and awaiting US inflation data this weekend.
US stocks started to fall from record highs on Friday, in a move analyzed as profit-taking, after US payrolls data showed a mixed picture but maintained expectations for a Fed rate cut in June.
Traders are now focusing on US inflation data due on Tuesday, which could change expectations for when major central banks will start cutting rates.
MSCI's World Equity Index fell 0.3%, after hitting a new record high on Friday. Europe's STOXX 600, which also hit a record high on Friday, fell 0.5%. London's FTSE 100 fell 0.5% and Germany's DAX fell 0.7%.
Amelie Derambure, senior asset portfolio manager at Amundi, said Monday's decline was likely due to uncertainty about the economic outlook, and high valuations in stocks. "There are some elements in the macro view that may not be as clear as desired," he said.
In the past week, comments from Fed Chairman Jerome Powell and European ECB policymakers raised expectations that interest rate cuts will begin in the summer, helping push stock indexes to new highs.
Derambure said there was "fatigue" in stocks, pointing to differences in the trajectory of the group of US tech stocks known as the "Magnificent Seven", which have grown strongly in recent years.
The US Consumer Price Index (CPI) report for February on Tuesday is expected to have risen 0.4% for the month and kept the annual rate at 3.1%. Core inflation is expected to rise 0.3%, which would push the annual rate down to its lowest level since early 2021 at 3.7%.
The US 10-year yield was down around one basis point at 4.0807%. European zone government bond yields were mostly slightly higher, with Germany's 10-year bond yield up one basis point at 2.281% after last week's biggest weekly decline since December.
The US dollar index strengthened 0.16% at 102.76, after falling more than 1% last week, and the euro was steady at $1.09355. The yen strengthened slightly after Reuters reported that a number of Bank of Japan policymakers were increasingly agreeing to the idea of ending negative rates this month.
Data released on Monday showed Japan was not in recession after economic growth was estimated to have risen to 0.4% on an annual basis for the fourth quarter of December. Chinese stocks rose after weekend data showed a jump in inflation.
