People pass by an electronic screen showing Japan's Nikkei share price index inside a conference hall in Tokyo, Japan June 14, 2022.
People pass by an electronic screen showing Japan's Nikkei share price index inside a conference hall in Tokyo, Japan June 14, 2022. Reuters / ISSEI KATO

Stock markets chalked up modest gains on Monday after last week's hefty losses as investors braced for a host of U.S. Federal Reserve speakers this week, where they could underline a commitment to fight inflation whatever rate pain required.

Trading was thinned by a U.S. holiday and investors predicted another choppy session.

The euro was little moved after French President Emmanuel Macron lost control of the National Assembly in legislative elections on Sunday, a major setback that could throw the country into political paralysis.

However, French government bond yields widened, a sign of some investor nervousness.

By 0920 GMT, the Euro STOXX rose 0.3%. Germany's DAX gained 0.4% while French shares eked out a similar gain despite Macron's electoral setbacks.

Holger Schmieding, an economist at Berenberg, said Macron's party would now have to learn the art of compromise to push ahead with its policies.

"As most Republicans and other mainstream forces in France are less interested in strengthening European integration than Macron, his ability to shape and promote the European agenda will be even more limited than before," he said.

Nasdaq futures climbed 0.68%, building on Friday's gains while S&P 500 futures rallied 0.5%.

The S&P 500 fell by almost 6% last week to trade 24% below its January high. Analysts at BofA noted this was the 20th bear market in the past 140 years and the average peak to trough bear decline was 37.3%.

Investors will be hoping it does not match the average duration of 289 days, given it would not end until October 2022.

In Asia, shares on Monday fell. MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.2% and Tokyo's Nikkei 0.7%.

Chinese blue chips increased 0.5%, aided by news President Joe Biden was considering removing some tariffs on China.

The focus on the path for interest rates and inflation is likely to dominate markets this week too. A series of central bank hikes last week, including a surprise move by the Swiss National Bank, will be followed by more tightening as policymakers try to tame soaring price growth.

Relief seems unlikely this week with UK inflation figures expected to show another alarmingly high reading that could push the Bank of England into hiking at a faster pace.

A whole chorus line of central bankers are also on the speaking calendar this week, led by a likely hawkish testimony from Federal Reserve Chair Jerome Powell's to the U.S. House of Representatives on Wednesday and Thursday.

"Markets are still digesting the higher re-pricing of Fed rate expectations, and global risk assets may struggle to show any sustainable rebound for now. All this should keep the dollar mostly in demand in a week where markets will focus on Powell's testimony," ING analysts said in a note.

UNCONDITIONAL

The Fed last week vowed its commitment to containing inflation was "unconditional", while Fed Governor Christopher Waller said on Saturday he would support another hike of 75 basis points in July.

"With rapidly slowing growth momentum and a Fed committed to restoring price stability, we believe a mild recession starting in Q4 is now more likely than not," warned analysts at Nomura.

"Financial conditions are likely to tighten further, consumers are experiencing a significant negative sentiment shock, energy and food supply disruptions have worsened and the outlook for foreign growth has deteriorated."

The hawkish outlook is keeping the dollar index higher and it last traded at 104.42. That was down 0.3% on the day but not far from last week's two-decade high of 105.790.

The euro rose 0.2% to $1.0516, still uncomfortably close to last week's trough at $1.0357.

The yen remained under broad pressure as the Bank of Japan stuck doggedly to its super-easy policies. The dollar was last down slightly at 134.64 yen, having reached its highest since 1998 against the Japanese currency last week.

After massive moves last week, government bond yields were generally calmer.

Bitcoin slipped 1% to $20,438, having bounced sharply over the weekend amid talk of a single large buyer.

Oil prices edged lower again after a sharp retreat late last week amid concerns a global recession would curb demand. [O/R]

Brent 0.7% to $112.29, while U.S. crude lost 0.5% to $109.03 per barrel.