Many markets in Asia were closed for holidays and analysts said the thin trading accentuated volatility. Shares dropped more than 2% in Paris and Frankfurt, while Hong Kong’s benchmark sank 3.3%.
Investors are watching to see whether the Federal Reserve will take any action to address the impact of rising prices on businesses and consumers.
Worries are mounting, also, about the U.S. debt ceiling. House Democrats said Friday they planned to move this week to suspend the cap on the government’s borrowing authority, and the White House ratcheted up pressure on Republicans by warning state and local governments that severe cuts lie ahead if the measure fails in the Senate.
Germany’s DAX dropped 2.1% to 25,163.25 and the CAC 40 in Paris shed 2.3% to 6,419.61. Britain’s FTSE 100 lost 1.4% to 6,866.39.
The future for the S&P 500 fell 0.3% while the contract for the Dow industrials gave up 1.3%.
The yield on the 10-year Treasury note slipped to 1.34% from 1.38% on Friday.
Heavyweight Hong Kong property companies and banks lost ground on persisting concerns over the potential for ripple effects from the financial troubles of Chinese developer Evergrande.
The company was expected to miss interest payments, as ratings companies forecast it may default on its debt. Its shares fell 10.6% on Monday.
Henderson Land Development dropped 13% and New World Development lost 12% amid reports that China would tighten oversight over the property sector in Hong Kong.
The Hang Seng in Hong Kong dropped 821 points to 24,099.14. Australia’s S&P/ASX 200 shed 2% to 7,248.20. Markets were closed in mainland China, South Korea, Japan, Taiwan and Malaysia.
“Asia is off to a nervous start today with liquidity seriously thinned by holidays,” Jeffrey Halley of Oanda said in a commentary. “The list of circling sharks is long, starting with increasing noise from the U.S. about the debt ceiling.”
The Fed is due to deliver its latest economic and interest rate policy update on Wednesday. The central bank has said higher costs for raw materials and consumer goods are still likely to be temporary as the economy recovers, but analysts worry that higher prices could stick around and dent companies’ bottom lines while also crimping spending.
Wall Street ended last week on a feeble note, with the S&P 500 index losing 0.9% to 4,432.99, its second straight weekly loss.
The Dow Jones Industrial Average fell 0.5% to 34,584.88, and the Nasdaq fell 0.9% to 15,043.97.
The Russell 2000 index of smaller companies recovered from an early slide, rising 0.2% to 2,236.87.
In other trading on Monday, U.S. benchmark crude oil lost 92 cents to $71.06 per barrel in electronic trading on the New York Mercantile Exchange. On Friday, it gave up 64 cents to $71.97 per barrel.
Brent crude, the standard for international pricing, lost 77 cents to $74.57 per barrel.
The U.S. dollar slipped to 109.74 Japanese yen from 109.95 yen. The euro fell to $1.1711 from $1.1731.