Stocks drop as traders weigh recovery, new infections

LONDON: Stock markets mostly dropped and the dollar fell Monday, as optimism about the global recovery was offset by concerns about a spike in new infections in several countries that have officials battling to avert new lockdowns.

Traders looked past Wall Street's strong lead Friday, supported by data showing US retail sales flattened last month.

That helped ease traders' fears that a surge in inflation could force the Federal Reserve to wind back its ultra-loose monetary policies sooner than expected.

However, a fall in consumer confidence owing to rising prices indicated the issue was unlikely to go away any time soon, and analysts said central bank officials had to tread a fine line between getting the economy back on its feet and keeping inflation under control.

"On the one side, we have the Fed's view, apparently embraced by equity investors, implying there is nothing to see here, given that base effects and reopening dynamics mean we should expect volatility in the data," said National Australia Bank's Rodrigo Catril.

"On the other side of the argument... (are) rising concerns that inflation is becoming unanchored with a decline in consumer sentiment a reflection of the negative impact inflation is having on disposable income."

Focus this week is on the release of minutes from the Fed's latest policy meeting at the end of last month, which will be pored over for an idea about members' views on inflation in light of surging commodity prices, supply bottlenecks and economic reopenings.

"Record highs in copper prices and fears over extended oil price gains will be hard to ignore" heading into the second half of the year, said Eric Robertsen at Standard Chartered.

"The Fed believes this is part of the economic reopening narrative" and will hold off making any moves now, he added. "But it might start looking over its shoulder if prices stay high."

Elsewhere, bitcoin fell to $42,185 briefly, its lowest since February, after Elon Musk on Sunday appeared to suggest his Tesla carmaker may sell -- or already had sold -- its holdings in the cryptocurrency.

The unit later pared the losses to sit at $44,455.

Tesla had already hammered the digital currency last week when it said it will halt bitcoin transactions because of environmental concerns.

In company news, trading in Hong Kong's largest pro-democracy media group was suspended Monday, days after authorities froze the assets of its jailed owner Jimmy Lai under a new national security law.

Next Digital Limited -- which publishes the Apple Daily newspaper -- said it would halt trading "pending the release of an announcement" about Lai's frozen assets, in a statement to the city's stock exchange.

Key figures around 1100 GMT -

London - FTSE 100: DOWN 0.7 percent at 6,993.57 points

Frankfurt - DAX 30: DOWN 0.3 percent at 15,367.46

Paris - CAC 40: DOWN 0.4 percent at 6,359.16

EURO STOXX 50: DOWN 0.4 percent at 4,001.06

Tokyo - Nikkei 225: DOWN 0.9 percent at 27,824.83 (close)

Hong Kong - Hang Seng Index: UP 0.6 percent at 28,194.09 (close)

Shanghai - Composite: UP 0.8 percent at 3,517.62 (close)

New York - Dow: UP 1.1 percent at 34,382.13 (close)

Euro/dollar: UP at $1.2166 from $1.2140 at 2115 GMT on Friday

Pound/dollar: UP at $1.4111 from $1.4100

Euro/pound: UP at 86.21 pence from 86.07 pence

Dollar/yen: DOWN at 109.12 yen from 109.34 yen

Brent North Sea crude: DOWN 0.1 percent at $68.67 per barrel

West Texas Intermediate: DOWN 0.1 percent at $65.33 per barrel