Concerns about the potential for further interest rate hikes weighed on stock markets Monday even as data pointed to weakening economies in the US and Europe, though Wall Street managed to recover some of last week's heavy losses.
Investors were spooked Friday by US jobs data that showed slower hiring but further wage increases -- underscoring persistent inflation pressures.
Many have been betting the Federal Reserve is near the end of its monetary tightening cycle as it seeks to engineer a "soft landing" for the world's largest economy -- a strategy also being pursued by the European Central Bank.
But Fed governor Michelle Bowman doused those hopes in a speech on Saturday, saying "consistent evidence" was needed that prices increases are slowing.
"I also expect that additional rate increases will likely be needed to get inflation on a path down to the FOMC's two percent target," she said.
But higher rates also increase the risk of broader economic slowdowns on both sides of the Atlantic.
Michael Hewson, chief market analyst at CMC Markets UK, said Bowman's comments underscored "the growing uncertainty that is not only starting to permeate central bank thinking but also investor sentiment more broadly".
As a result, investors are likely to take a wait-and-see stance ahead of US consumer price data set for release on Thursday.
European markets were little changed after opening broadly lower, tracking the losses on Wall Street and a mixed showing in Asia.
Germany's industrial output plunged in June, official figures showed, with the economy ministry warning of a gloomy outlook as high energy prices and interest rates continued to take their toll in Europe's biggest economy.
"Early economic data has done little to help lift the outlook for growth in Europe," said Joshua Mahony, chief market analyst at Scope Markets, adding that sentiment was hit also by weak UK housing numbers.
Average UK property prices fell 0.3 percent in July from June, major mortgage provider Halifax said, as homeowners struggle with surging interest rates.
Elsewhere Monday, oil prices fell after a pre-weekend rally, knocked by a strengthening dollar that tends to discourage purchases, but also reflecting supply concerns after a Russian oil tanker in the Black Sea was struck by Ukrainian drones.
The Black Sea strikes "increase the geopolitical risks," according to analysts at DNB, noting the "significant volumes" of both crude oil and refined fuels transported via the Black Sea.
- Key figures around 1500 GMT -
London - FTSE 100: DOWN 0.4 percent at 7,534.23 points
Frankfurt - DAX: DOWN 0.2 percent at 15,919.90
Paris - CAC 40: DOWN 0.1 percent at 7,309.66
EURO STOXX 50: FLAT at 4,332.16
Tokyo - Nikkei 225: UP 0.2 percent at 32,254.56 (close)
Hong Kong - Hang Seng Index: FLAT at 19,537.92 (close)
Shanghai - Composite: DOWN 0.6 percent at 3,268.83 (close)
New York - Dow: UP 0.7 percent at 35,321.81
Euro/dollar: DOWN at $1.0997 from $1.1012 on Friday
Pound/dollar: UP at $1.2772 from $1.2748
Euro/pound: DOWN at 86.10 from 86.35 pence
Dollar/yen: UP at 142.04 yen from 141.77 yen
West Texas Intermediate: DOWN 0.8 percent at $82.16 per barrel
Brent North Sea crude: DOWN 0.7 percent at $85.62 per barrel
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