Asian shares stalled and oil prices slid on Monday as coronavirus lockdown in Shanghai looked set to hit global activity while throwing another wrench into supply chains that could add 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 skid $3.68 to $116.97, while US crude fell $3.30 to $110.60.
Risk sentiment was helped by hopes of progress in Russian-Ukranian peace talks to be held in Turkey this week after President Volodymyr Zelenskiy said Ukraine was prepared to discuss 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 percent. The index is down 2.3 percent for the month but well above recent lows.
Japan's Nikkei dipped 0.4 percent, but is still almost 6 percent firmer for the month as a sinking yen promised to boost exporter earnings.
S&P 500 stock futures eased 0.2 percent, while Nasdaq futures slipped 0.3 percent.
Wall Street has so far proved remarkably resilient to a radically more 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 percent.
Even that outlook is not aggressive enough for some. Citi last week forecast 275 basis points of tightening this year including half-point hikes in May, June, July and September.
"We expect the Fed to continue hiking into 2023, reaching a policy rate target range of 3.5-3.75 percent," wrote the analysts at Citi. "Risks to the terminal policy rate remain to the upside given the upside risk to inflation."
The key data event of this week will be US payrolls on Friday when another solid increase of 475,000 is expected with the jobless rate hitting a new post-pandemic low of 3.7 percent. Also due are a bevy of surveys on global manufacturing and readings on US and EU inflation.
"The US data will help shape expectations whether the tightening in financial conditions is starting to spill into the broader economy," said analysts at NatWest Markets.
Yields on 10-year Treasuries jumped 33 basis points last week and are up a staggering 66 basis points on the month at 2.48 percent, sharply lifting US mortgage rates.
"The next major theme will be rising fears of a recession as the Fed hikes into decelerating growth, potentially supporting a peak in yields into this summer," cautioned NatWest.
In currency markets, the Japanese yen has been the major loser as policy makers there keep yields around zero and sky-high commodity prices send its import bill ballooning.
The dollar has surged 6.2 percent on the yen this month to reach 122.18, while the resource-rich Australian dollar has climbed almost 10 percent to 91.88 yen.
Even the otherwise ailing euro is up 4 percent on the yen this month at 134.27. The single currency has lost about 2.1 percent on the dollar in the same period, but at $1.0980 is above the recent two-year trough of $1.0804.
The dive in the yen has kept the U.S. dollar index up at 98.848, with a gain for the month of 2.2 percent.
In commodity markets, gold was flat at $1,955 an ounce to be up around 2.5 percent on the month.