European Shares Likely To See Tepid Start As Risks Mount

(RTTNews) - European stocks may drift lower at open on Monday, as a rebound in COVID-19 cases in China, increased tensions between Russia and Ukraine, and new U.S. controls targeting Chinese companies added to the list of global uncertainties.

China stepped up efforts to contain fresh COVID-19 outbreaks as Shanghai posted 34 new local infections on Sunday, the most in almost three months.

A measure of Chinese service sector activity fell for the first time since May, adding to growth worries as investors returned from a week-long holiday.

Key inflation and trade data are due later in the week ahead of the Communist Party's 20th National Congress which opens on Oct. 16.

Friction between Washington and Beijing intensified after the U.S. Department of Commerce added limits on exports of chips and related production tools to China, citing national security concerns.

Meanwhile, markets wait to see how the Kremlin might respond after a powerful blast damaged Russia's road-and-rail bridge to Crimea.

The dollar index and U.S. bond yields are rising again amid bets that the Federal Reserve will raise rates by 75 basis points for a fourth straight time next month.

Fed Bank of New York President John Williams said last week that rates need to rise to around 4.5 percent over time to bring down inflation quickly.

U.S. inflation data as well as minutes from the Fed's September meeting due this week will provide more insights into policymakers' view of where inflation stands and the outlook for the future path of interest rates.

Gold ticked lower after plunging below the $1,700 an ounce mark last week while oil prices fell about 1 percent in Asian trade, easing off five-week highs hit on Friday.

The U.S. earnings season starts in earnest this week, with four out of the world's largest banks - JPMorgan, Wells Fargo, Morgan Stanley and Citi - reporting Friday.

U.S. stocks tumbled on Friday and yields climbed, as rising oil prices and signs of a strong labor market showing a falling unemployment rate bolstered the case for further rate rises. Investors also weighed a profit warning from microchip maker AMD.

U.S. non-farm payroll employment jumped by 263,000 jobs in September while economists had expected an increase of 250,000 jobs. The Dow lost 2.1 percent, the tech-heavy Nasdaq Composite shed 3.8 percent and the S&P 500 gave up 2.8 percent.

European stocks fell sharply on Friday, with interest-rate hike concerns and disappointing economic data from the euro area weighing on sentiment.

The pan European Stoxx 600 fell 1.2 percent. The German DAX dropped 1.6 percent and France's CAC 40 index declined 1.2 percent while the U.K.'s FTSE 100 ended flat with a negative bias.