Global stock markets fell and the dollar gained ground on Monday as investors waited for news from a series of central bank meetings this week and contemplated a future without the Fed's safety net.
The US Federal Reserve is expected to signal a faster rollback on asset purchases, which could bring it one step closer to a rate hike. The Fed's Monetary Policy Committee will also update its members' interest rate expectations for the next few years.
The dollar rose ahead of the upcoming meetings as investors consider the possibility that the Fed will hike rates in 2022.
"Central bank rate decisions this week will likely show that stocks must move higher without the help of central bankers," said Edward Moya, senior analyst at OANDA.
"Volatility will remain elevated during all of these Fed, ECB and BOE decisions."
The European Central Bank, the Bank of England and the Bank of Japan are also meeting this week and are each heading for a normalization of their own monetary policy.
Fear of the Omicron variant of COVID-19 weighed on markets in the US and Europe after British Prime Minister Boris Johnson warned of a "tidal wave" of new cases and the World Health Organization (WHO) spoke of a "very high" global risk , as there are signs that the disease is eluding vaccination protection.
The FTSE index fell 0.83%.
The pan-European STOXX 600 index lost 0.43% and the MSCI index for stocks from around the world fell 0.80%.
The Dow Jones Industrial Average fell 320.04 points, or 0.89%, to 35,650.95, the S&P 500 fell 43.05 points, or 0.91%, to 4,668.97, and the Nasdaq Composite fell 217.32 points or 1.39% to 15,413.28.
The dollar index rose 0.27% while the euro fell 0.01% to $ 1.1282 as it is vulnerable to one, given expectations that the US Federal Reserve will tighten policies faster than the ECB Interest rate hike in the US applies.
The US 10-year Treasury yield fell Monday and the yield curve flattened as traders braced themselves for an aggressive tone from the Federal Reserve at their meeting.
The 10-year government bond yield fell 6.5 basis points to 1.424% and the 30-year government bond yield fell 6.7 basis points to 1.817%. [US /]
The ECB is likely to confirm at its meeting on Thursday that its 1.85 trillion euros ($ 2.09 trillion) economic stimulus plan will expire next March.
Expectations for a rate hike at Thursday's Bank of England meeting have been lowered as Omicron raises concerns about the near-term economic outlook.
Oil futures fell as new doubts surfaced about the effectiveness of the vaccines against the Omicron coronavirus variant, despite OPEC forecast in its monthly report that the variant’s impact on fuel demand would be minor.
Brent futures declined 1.01% to $ 74.39 a barrel, while US crude West Texas Intermediate (WTI) declined 0.53% to $ 71.29.
