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

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

Oil also pulled back after hitting multi-year peaks the previous day on keen demand and tight supplies.

“Inflation worries persist, though our tradeable US natural gas and oil prices have edged back from the highs,” said analyst Neil Wilson.

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

All eyes are on the release this week of inflation data in the United States and China, where expectations are for 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 from 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 rather than later, while New Zealand and South Korea have already done so.

The pressure to act comes as energy prices hit multi-year or record highs and demand picks up ahead of the northern hemisphere winter, while supplies are limited as a result of pandemic lockdowns.

The issue is hitting countries around the world and increasing worries of a worldwide fuel squeeze, with WTI oil hitting a seven-year peak and Chinese coal prices also hitting a new record.

“The energy crisis is showing no signs of abating, which means considerable cost pressures on companies, and consumers facing the prospect of having less money in their pocket,” said AJ Bell investment director Russ Mould.

China’s ongoing crackdown on the private sector and the debt woes of the country’s property giant Evergrande also dampened investor sentiment in Asia.

Hong Kong, Shanghai, Tokyo, Sydney, Seoul, Singapore, Taipei, Mumbai, Manila and Wellington all finished in negative territory.

London, Frankfurt and Paris also fell across the board.

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

- Key figures around 1100 GMT -

London - FTSE 100: DOWN 0.4 percent at 7,120.92 points

Frankfurt - DAX: DOWN 0.3 percent at 15,154.74

Paris - CAC 40: DOWN 0.4 percent at 6,542.21

EURO STOXX 50: DOWN 0.3 percent at 4,059.43

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)

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

Euro/dollar: UP at $1.1555 from $1.1552 at 2100 GMT

Pound/dollar: UP at $1.3614 from $1.3595

Euro/pound: DOWN at 84.85 from 84.97 pence

Dollar/yen: UP at 113.35 yen from 113.31 yen

Brent North Sea crude: UP 0.4 percent at $83.97 per barrel

West Texas Intermediate: UP 0.5 percent at $80.94 per barrel