A look at the day ahead in European and global markets from Vidya Ranganathan.
The global chip sector is stealing the spotlight from major central banks, after the world's top contract chipmaker raised concerns over demand, hitting share prices of semiconductor stocks.
Reuters reported on Friday that TSMC had asked its major vendors to delay deliveries, and the doubts that report has sown over demand continued to weigh on sentiment in Asia on Monday, adding to the gloom after Wall Street's poor finish last week.
There's also a new worry over chip demand from automakers as simultaneous strikes at factories of Detroit firms General Motors (NYSE:GM), Ford (NYSE:F) and Chrysler parent Stellantis (NYSE:STLA) enters day four.
Japan's Respect for the Aged holiday cushioned volatility in Asia and some signs of stability in Chinese markets after a swathe of policy measures have given pause to pessimism.
Not entirely though, after troubled Chinese trust firm Zhongrong International Trust Co said it was unable to make payments on some trust products on time, showing the property sector is still the biggest source of stress.
The Bank of Japan's policy meeting on Friday is the highlight of the week in Asia, after Governor Kazuo Ueda stoked speculation of an imminent move away from ultra-loose policy. In a week packed with central bank meetings, decisions are also due from the U.S. Federal Reserve on Wednesday and Bank of England on Thursday.
After the European Central Bank's fireworks last week, the euro will be closely watched as a signal for whether the backlash from more hawkish ECB members is gaining any traction with traders and investors.
The BOE is likely to hike interest rates for the 15th time later in the week, while the Fed seems set for a hawkish pause. Fed futures show the overnight lending rate staying above 5% through late July 2024, in a sign the Fed won't back off its higher for longer message.
In this mix, the dollar seems unstoppable and aided both by growth and yield advantages.
One more little complication is the steady grind higher in oil prices to new highs that is stoking inflation concerns, just as central banks in most developed economies are at or approaching the end of their tightening cycles. Stagflation fears are rising.
Key developments that could influence markets on Monday:
ECB's de Guindos and Panetta speak
UK Sept house prices
U.S. Sept Fed services business activity, NAHB housing index