Global shares slide ahead of key US inflation report as central banks step up hawkish talk

• Global shares fell, as investors grew increasingly concerned that a strong read of US inflation will trigger even faster rate hikes.
• US consumer inflation is already running at its hottest in over 40 years, which is rattling stock markets.

Global stocks fell on Tuesday as investors grew increasingly concerned that stubbornly high inflation will push central banks into much more aggressive action than expected.

US consumer inflation is expected to have risen further in March, which could push the Federal Reserve to raising rates more aggressively than many currently expect. Economists expect consumer inflation to come in at 8.4%, up from February's 7.5%, which was already the highest since January 1982.

Dow Jones and S&P 500 futures were both down around 0.1%, while Nasdaq futures reversed earlier losses and rose 0.1%.

The Fed is already expected to raise interest rates by 50 basis points at its next meeting in May, as well as to announce it will shrink its balance sheet by $95 billion a month, which will further raise the cost of credit, according to its most recent meeting minutes.

"The main focus today will be today's US CPI number for March, which look set to push well above 8% later today," said Michael Hewson, chief market analyst at CMC Markets. "Having seen the Federal Reserve pull the trigger on its first interest rate rise since 2018 last month, much has been made of the timeline of how big the next few rate increases are likely to be with the odds increasing of more than one 50bps rate rise occurring in the coming months."

The Fed raised rates by 25 basis points in March, but it hasn't raise rates by more than that at a single meeting since 2000.

Meanwhile in Europe, shares were under pressure after another surge in German inflation and as Russia's war on Ukraine escalated. The Pentagon said on Tuesday it was monitoring several Ukranian reports that Russian forces had used chemical weapons in the besieged port city of Mariupol.

The European Stoxx 600 fell 0.5%, the German DAX dropped 1.0%, and the French CAC 40 slid 0.8%.

The European Central Bank holds its next policy meeting on Thursday and has signaled it is concerned about inflation, but economists said the threat to economic growth and rising energy prices from the Russia-Ukraine war might affect how aggressive it is.

"The risk is that the ECB will probably not validate the July pricing of a potential rate hike just yet because of uncertainty over the growth impact from the Russia-Ukraine conflict", Jordan Rochester, a currency strategist at Nomura, said. "The ECB may have more hikes priced in, but rates are still likely to rise faster in the US."

War in Ukraine has sent global commodity prices skyrocketing and exacerbated inflation. Because of its reliance on Russia for energy in particular, Europe risks being harder hit than other regions. Brent crude futures were last up 3% on the day at $101.45 a barrel, skimming one-month lows, but still showing a gain of 30% for the year to date.

Asian stocks were a mixed bag due to inflation concerns and surging COVID cases in China, which has implemented strict lockdowns, but started easing restrictions in financial hub Shanghai.

Japan's Nikkei 225 dropped 1.85%, while China's Shanghai Index rose 1.46% and Hong Kong's Hang Seng Index gained 0.52%.