Asian shares stalled and oil prices fell on Monday as the coronaviruses lockdown in Shanghai looked set to hit global activity, while adding to inflationary pressures.
China's financial hub of 26 million people told all firms to suspend manufacturing or have people work remotely in a two-stage lockdown over nine days.
The spread of restrictions in the world's biggest oil importer saw Brent drop $3.68 to $116.97, while U.S. crude fell $3.30 to $110.60.
The hope of progress in Russian-Ukranian peace talks to be held in Turkey this week helped boost risk sentiment, as President Volodymyr Zelenskiy said Ukraine was prepared to consider adopting a neutral status as part of a deal.
Early action on Monday was muted, with MSCI's broadest index of Asia-Pacific shares outside Japan off 0.1%. The index is down 2.3% for the month, but well above recent lows.
Japan's Nikkei fell 0.4%, but is still nearly 6% firmer for the month, as a sinking yen promised to boost exporter earnings.
Wall Street has so far proved remarkably resilient to a hawkish Federal Reserve. Markets are pricing in eight hikes for the remaining six policy meetings this year, taking the funds rate to 2.50 -- 2.75%.
The outlook is not aggressive enough for some. Citi forecasts 275 basis points of tightening this year, including half-point hikes in May, June, July and September.
The Fed is expected to continue hiking into 2023, reaching a policy rate target range of 3.5 -- 3.75%, according to analysts at Citi. The upside risk to the terminal policy rate is a positive one given the upside risk to inflation. The jobless rate is expected to hit a new post-pandemic low of 3.7%, as the US payrolls will increase by 475,000 on Friday. There are a lot of surveys on global manufacturing and readings on U.S. and EU inflation.
The U.S. data will help shape expectations of whether the tightening of financial conditions will spill into the broader economy, according to analysts at NatWest Markets.
Yields on 10 year Treasuries went up 33 basis points last week and are up 66 basis points on the month to 2.48%, a sharply lifting U.S. mortgage rates.
The Japanese yen has been the major loser in currency markets, as policy makers there keep yields around zero and sky-high commodity prices send its import bill ballooning.
The dollar has risen 6.2% on the yen this month to reach 122.18, while the resource-rich Australian dollar has climbed almost 10% to 91.88 yen.
Even the otherwise ailing euro is up 4% on the yen this month, at 134.27. In the same period, the single currency has lost 2.1% of its value, but at $1.0980 is above the recent two-year trough of $1.0804.
The U.S. dollar index was up to 98.848, with a gain of 2.2% for the month.
In commodity markets, gold was flat at $1,955 an ounce, up around 2.5% on the month.