Inflation data will be closely watched this week as the Federal Reserve prepares to remove its ultra-loose monetary policy and considers lifting interest rates

Hong Kong (AFP) - Asian markets retreated Tuesday as investors grew increasingly concerned about a brewing energy crisis, spiking inflation, signs of a slowdown in the global economy and an end to central bank financial support.

China’s ongoing crackdown on the private sector and the debt woes of the country’s property giant Evergrande were also acting as a dampener on sentiment.

World markets have come under pressure in recent weeks as the reopening of economies and supply chain snarls ramp up inflation, with a rally in commodity prices a major factor.

All eyes are on the release this week of inflation data in the United States and China, with expectations for multi-high readings that will add pressure on central banks to tighten monetary policy.

The Federal Reserve has already signalled it will begin tapering its vast bond-buying programme by the end of the year as it looks to prevent prices from running out of control and the economy overheating.

While the move has been widely expected for some time, consistently high inflation is increasing the likelihood that interest rates will rise as early as next year.

The Bank of England appears close to lifting borrowing costs sooner than later, while New Zealand and South Korea have already done so.

The pressure to hike is coming as energy prices rocket to multi-year or record highs as demand ramps up ahead of the northern hemisphere winter, at the same time as supplies are limited in the wake of pandemic lockdowns.

The issue is hitting countries across the planet and increasing worries of a worldwide fuel squeeze, with WTI oil hitting a seven-year peak, while Chinese coal prices are at a record. WTI and Brent were slightly higher Tuesday and some observers are predicting they could hit $100 by the year’s end.

“Stocks are struggling as investors start to grow nervous knowing markets won’t see any quick fixes over the brewing energy crisis and inflationary pressures,” said OANDA’s Edward Moya.

“The rest of the year will be all about inflation and the nagging supply chain issues that seem poised to last for at least a couple more quarters.”

Hong Kong, Shanghai, Tokyo, Sydney, Seoul, Singapore, Taipei, Mumbai, Manila and Wellington were all in negative territory, with a little profit-taking after recent gains adding to the weakness. Bangkok and Jakarta bucked the trend, however.

London, Frankfurt and Paris all fell in early trade.

Tapas Strickland, at National Australia Bank, added: “The rise in energy prices is fuelling concerns that the transitory lift in inflation seen in the wake of the pandemic may prove to be longer lasting.”

Investors are also awaiting the beginning of the corporate earnings season, which gets under way this week with US banking giants.

The readings will be closely watched for an idea about how firms are faring in light of the fast-spreading Covid Delta variant and rising inflationary pressures.

While this round is tipped to be strong, analysts said the key will be forecasts for the next three months and into 2022.

- Key figures around 0810 GMT -

Tokyo - Nikkei 225: DOWN 0.9 percent at 28,230.61 (close)

Hong Kong - Hang Seng Index: DOWN 1.4 percent at 24,962.59 (close)

Shanghai - Composite: DOWN 1.3 percent at 3,546.94 (close)

London - FTSE 100: DOWN 0.7 percent at 7,100.32

West Texas Intermediate: UP 0.1 percent at $80.60 per barrel

Brent North Sea crude: UP 0.3 percent at $83.87 per barrel

Euro/dollar: UP at $1.1557 from $1.1551 at 2100 GMT

Pound/dollar: DOWN at $1.3587 from $1.3592

Euro/pound: UP at 85.07 from 84.96 pence

Dollar/yen: DOWN at 113.07 yen from 113.31 yen

New York - Dow: DOWN 0.7 percent at 34,496.06 (close)