US stocks posted their biggest drop yesterday, with the S&P 500 losing 2.4%.

European stocks also fell by about 2%.

In terms of bonds, short-term US Treasury yields hovered near 2022 peaks, following a sell-off in EU bonds, which was caused by the ECB's half-point rate hike later this year.

The next test for markets is the US inflation data on Friday, which will give an idea on how aggressively the Federal Reserve will raise rates. The data is expected to show an annual increase in consumer prices of more than 8%.

In commodities, oil prices declined, in part because demand decreased after Shanghai announced a lockdown in its seven districts this weekend to conduct Covid testing. Chinese President Xi Jinping urged his government to unwaveringly stick to their "Covid-Zero" policy, all while balancing with the needs of the economy.

The key event for this week is the release of data on US CPI and consumer sentiment.