Wall Street was set for a weaker session on Monday on mounting concerns over central bank policy-tightening rippling through the global economy and company earnings. The dollar was buoyed by haven demand.

Futures contracts on the Nasdaq 100 index dropped 0.4%, pressured by the semiconductor sector after Washington’s move to further restrict China’s access to US technology, and signs of slowing chip demand worldwide. S&P 500 index futures slipped 0.2%.

The mood overall remains dour, ahead of Thursday’s US inflation data and a raft of bank earnings that will kick off the third-quarter season in earnest. A hotter-than-expected inflation reading, coming on top of last week’s strong labor print, will heap pressure on policy makers to extend 75 basis-point rate hikes beyond this year.

“Given continued Fed tightening, both macroeconomic conditions and risk markets are likely to weaken considerably over the next few quarters,” Erik Weisman, a portfolio manager at MFS Investment Management, wrote in a note to clients. “Fed tightening acts on the economy only with a significant lag.”

Signs of a dangerous new escalation in the Russia-Ukraine war also sapped risk appetite, lifting the dollar against other currencies, while British authorities’ latest efforts to support jittery markets largely failed to reassure pound traders.

The relentless central bank policy-tightening is making increasingly investors gloomy about the upcoming earnings season. JPMorgan Chase & Co. and Citigroup Inc. are among the big banks that will unveil earnings later this week.

Even after this year’s brutal selloff, have not priced all the risks stemming from higher interest rates and stubbornly high inflation. More than 60% of the 724 respondents to Bloomberg’s latest MLIV Pulse survey predicted the earnings season would push the S&P 500 Index lower.

“The bear market will not be over until the deteriorating fundamental picture is more fully discounted,” strategists at Morgan Stanley warned.

Shares in Microchip Tech, Nvidia Corp, Advanced Micro Devices slipped about 1% in premarket New York trade. Europe’s broad Stoxx 600 gauge traded flat with semiconductor and consumer stocks losing ground.

Credit Suisse Group AG rose as much as 3.7% after Bloomberg News reported the bank’s securitized products group had drawn interest from bidders, including Pimco.

Meanwhile, Britain stepped up efforts to support market functioning. The Bank of England extended emergency measures backing the bond market through early next month while Chancellor of the Exchequer Kwasi Kwarteng brought forward the date at which he will deliver his much-awaited fiscal strategy.

Despite the measures, with 30-year borrowing costs jumped above 4.5%. The pound slipped to trade at a 12-day low.

“The BOE is going to calm the market, but it’s not going to save the market,” said Geoffrey Yu, a senior strategist at Bank of New York Mellon in London. The central bank “is not going to cap yields,” he said.

source :- bloomberg