(Reuters) – Diplomacy has been a frantic effort to resolve the Russia-Ukraine crisis. While the NATO alliance and leaders from both the U.S., European Union and NATO will meet this week, all sides will continue to court China for their support.

The Purchasing Managers Indexes for March may show what kind of impact economic confidence has taken. Central banks are continuing to follow different paths. Norway is expected tighten again. However, China maintained the benchmark rate for household and corporate lending unaffected on Monday.

This is your market week in Singapore from Tom Westbrook, Lewis Krauskopf, Sujata Ranasinghe and Dhararanasinghe.

1. TALKING SHOPS

The Russian air force continues to bomb Ukrainian cities and there has been no progress in the peace negotiations between them. Still, hectic diplomacy continues, across multiple fronts.

Russia has engaged the help of China and India, not only to export commodities that are exempt from Western sanctions, but also because it is a strong supporter of India, China, and other countries.

Volodymyr Zeleskiy, Ukrainian President, lobbying NATO and foreign Parliaments to establish a no fly zone in his country. NATO is wary about direct conflict with Russia, which has nuclear weapons. On Wednesday, NATO’s chief Jens Stoltenberg called it “a crucial moment for our security”.

The meeting will be attended by President Joe Biden. There will also be a midweek EU summit at Brussels. This is aimed to strengthen the relationship between the United States and its European allies.

The West is at risk of rifts between China and India. These countries have never condemned Russian actions. India has been buying oil from Russia and looking into a rupee/rouble payment system. Biden calling China’s Xi Jinping would not affect China’s attempts to occupy Russia’s space vacated from them by Western corporations.

Graphic: Maps: Tracking the Russian invasion of Ukraine Ukraine conflict map: https://graphics.reuters.com/UKRAINE-CRISIS/gdpzybkrlvw/bigmap.jpg

For an interactive version of the graphic: https://graphics.reuters.com/UKRAINE-CRISIS/zdpxokdxzvx/index.html

2 LITMUS TEST

This week’s flash PMI is here. It will provide a measure of how the effect of war in Ukraine on economic activity.

The PMIs generally have not fallen below the 50 level that distinguishes between expansion and contraction. A record-breaking slump in German investor motivation in March indicated that a possible recession is not impossible in Europe’s most populous economy.

The ZEW was not well-received by the markets. Instead, attention was shifted to central banks’ attempts to control inflation.

As rising energy prices squeeze consumption and real incomes, PMIs that are seriously negative could set off alarms about a recession.

Graphic: How will the war in Ukraine affect the global economy?: https://fingfx.thomsonreuters.com/gfx/mkt/jnpwebmxzpw/theme1603.PNG

3/S&P 500 THEN AND NOW

On March 23, 2020, it emerged from an COVID-related plunge. Thanks to huge government stimulus, and the unprecedented Federal Reserve support, the stock has recovered 90%.

The markets now have a whole new set of concerns. Chief among them: whether the Fed, which lifted rates on Wednesday for the first time since 2018,– will be able to fight soaring inflation without driving the economy into recession.

This year’s 10-year Treasury yields rose by almost 70 basis points while the 2-year Treasury yields soared 120 bps. It could signal an imminent economic recession if the difference between these segments, which is currently at 20 bps, becomes negative.

Markets will be watching the Fed’s rate hike trajectory, which was more aggressive than most expected. The data includes PMIs and consumer sentiment. New home sales, durable goods, and new homeowner sales are also due. They may indicate whether the S&P 500 can claw back a year-to-date 8% loss.

Graphic: US stock market’s rebound from COVID-19: https://fingfx.thomsonreuters.com/gfx/mkt/lbpgnzkbkvq/Pasted%20image%201647449215498.png

4/ THE HAWK and THE DOVE

Norway is the only developed country in the bloc to have tightened post-pandemic policies. It raised rates in December and September. It will raise rates again on March 24, bringing them to 0.75%.

The banks anticipate four rate hikes in 2019 with inflation at or above 2%, and forecasts of 3.6% GDP growth by 2022. Ida Wolden Bache, the new governor of banks, will chair this meeting.

The Swiss National Bank meets every day and is not expected to show any hawkishness. The Swiss National Bank is expected to remain calm and not rush to increase its world-low -0.75% interest rate.

While February’s inflation rate of 2.2% was the highest recorded since 2008, a tighter policy could lead to a greater appreciation for Swiss Francs, which is an important concern in the export-oriented economy. Recent intervention by the SNB was rare and it also increased foreign currency purchases.

Graphic: Norway rate rise: https://fingfx.thomsonreuters.com/gfx/mkt/znpnenykzvl/Pasted%20image%201647547667197.png

5/BOTTOMS UP? China’s State Council promises that policy easing will happen and authorities will make markets more friendly gave Chinese stocks the biggest boost in over a decade. Now, the challenge is to provide meaningful support and not spooke investors about the economic state. On Monday, however, the benchmark loan prime rates remained unchanged .

Many expect that policy easing will be achieved by banks reducing their reserve requirements ratios, or by lowering the medium-term rate. Investors need to know when this happens.

Graphic: China stocks: https://fingfx.thomsonreuters.com/gfx/mkt/gdvzybzddpw/Pasted%20image%201647548107794.png