Wayne Cole

SYDNEY, (Reuters) – Asian shares stalled Monday and oil prices fell on Monday due to a coronavirus lockdown at Shanghai. This was expected to impact global activity as well as throwing another wrench in supply chains which could increase inflationary pressures.

China’s 26 million-strong financial center ordered all businesses to cease manufacturing, or allow people to work from home in a nine-day lockdown.

The increase in restrictions at the largest oil importer worldwide saw oil prices drop from $3.68 per barrel to $116.97 to $3.30 per barrel to $110.60 [O/R]

Hopes of Russian-Ukranian peace negotiations in Turkey this week, after President Volodymyr Zilenskiy stated that Ukraine is open to discussing a neutral status in a settlement, helped to ease risk sentiment

MSCI’s Asia-Pacific broadest index outside Japan was off 0.1% on Monday, but there were no early moves. The index fell 2.3% over the month, but is well above previous lows.

The index fell 0.4% but was almost 6% stronger for the month, as an expected sinking of the yen will boost exporter earnings.

Futures stock prices fell 0.2% and Nasdaq futures declined 0.3%

Wall Street has been remarkable resilient against a Federal Reserve that is radically more hawkish. Eight hikes in interest rates are expected for each of the remaining six Federal Reserve policy meetings, bringing the fund rate to 2.50-2.2755%.

For some, even this outlook may not be aggressive enough. Citi predicted last week that tightening would reach 275 basis point this year, with half-point rises in May and June, July, September and September.

Citi analyst wrote, “We anticipate the Fed to continue hiking through 2023, at a policy rate target range between 3.5-3.75%.” The upside risks of inflation mean that the terminal rate policy rate is still at risk.

U.S. payrolls will show a solid Friday increase of 475,000, with the unemployment rate reaching a new low post-pandemic of 3.7%. This is the key data event for this week. A host of global manufacturing surveys and data on U.S.-EU inflation are also due.

NatWest Markets analysts stated, “The U.S. Data will help shape expectations whether or not the tightening of financial conditions is beginning to spill over into the larger economy.”

The yields of 10-year Treasuries rose 33 basis points and were up an astonishing 66 basis points for the month at 2.488%. This sharply boosted U.S. mortgage rates.

NatWest cautioned that the Fed’s next move will likely be to increase fears about a recession and slow down growth.

As policymakers keep yields close to zero and commodity prices skyrocketing, Japan’s yen has suffered the most in currency markets. This means that it is now the largest loser on the market.

Dollar has increased 6.2% against the Japanese yen to reach 122.18. The resource-rich Australian dollar, however, has gained almost 10% to 91.88.

At 134.27, even the otherwise weak euro has risen 4% against the yen. The dollar has seen a 2.1% drop in value, however the currency single is up 4% at $1.0980, which is higher than the $1.0804 two-year low.

The yen’s plunge has not stopped it from rising to 98.848, with an increase of 2.2% for the month.

Commodity markets were flat with gold at $1,955 per ounce, which was up 2.5% over the previous month. [GOL/]