The substantially higher-than-expected US CPI print on Friday was hard to digest for investors, who sold both bonds and equities and quashed expectations that policymakers were starting to gain the upper hand in capping soaring prices.
"This is happening in spite of the actions that have so far been taken by central banks and which are stoking fears that they will have to go harder and faster if inflation is to be tamed, the cost of which is being increasingly seen as lower growth and potentially recession," said Stuart Cole, chief macro strategist at Equiti Capital in London.
Money markets are pricing in a total of almost 250 bps in rate hikes by the US Federal Reserve to the end of the year with only five meetings remaining with some investment banks pencilling in a 75-basis-point hike at a policy meeting this week. Multiple indicators of growth in markets slumped on Monday from technology shares in Hong Kong to the Australian dollar as investors fled to the perceived safe haven shelter of the US dollar.