Asian share markets and oil prices slipped on Monday as investors fretted about the economic fallout from fresh COVID-19 restrictions in China, with resulting risk aversion benefiting bonds and the dollar.
Beijing's most populous district urged residents to stay at home on Monday as the city's COVID case numbers rose, while at least one district in Guangzhou was locked down for five days.
The rash of outbreaks across the country has been a setback to hopes for an early easing in strict pandemic restrictions, one reason cited for a 10% slide in oil prices last week.
Chinese blue chips fell 1.5% in early trade, dragging MSCI's broadest index of Asia-Pacific shares outside Japan down 1.3%. Japan's Nikkei eased 0.1% and South Korea lost 1.1%.
S&P 500 futures were down 0.4%, while Nasdaq futures slipped 0.3% 50 futures lost 0.3% and FTSE futures 0.2%.
The US Thanksgiving holiday on Thursday combined with the distraction of the soccer World Cup could make for thin trading, while Black Friday sales will offer an insight into how consumers are faring and the outlook for retail stocks.
Minutes of the US Federal Reserve's last meeting are due on Wednesday and could sound hawkish, judging by how officials have pushed back against market easing in recent days.
Atlanta Federal Reserve President Raphael Bostic on Saturday said he was ready to step down to a half-point hike in December but also underlined that rates would likely stay high for longer than markets expected.
Futures imply an 80% chance of a rise of 50 basis points to 4.25-4.5% and a peak for rates around 5.0-5.25%. They also have rate cuts priced in for late next year.
"We are comfortable that the deceleration underway in US inflation and European growth produces a moderation in the pace of tightening starting next month," said Bruce Kasman, head of research at JPMorgan.
"But for central banks to pause they also need clear evidence that labour markets are easing," he added. "The latest reports in the US, euro area, and UK point to only a limited moderation in labour demand, while news on wages points to sustained pressures."
Central banks in Sweden and New Zealand are expected to hike their rates this week, perhaps by an outsized 75 basis points.
There are at least four Fed officials scheduled to speak this week, a teaser ahead of a speech by Chair Jerome Powell on Nov. 30 that will define the outlook for rates at the December policy meeting.
PRICED FOR RECESSION
Bond markets clearly think the Fed will tighten too far and tip the economy into recession as the yield curve is the most inverse it has been in 40 years.
On Monday, 10-year note yields of 3.81% were trading 71 basis points below the two-year.
The Fed chorus has helped the dollar stabilise after its recent sharp sell-off, though speculative positioning in futures has turned net short on the currency for the first time since mid-2021.
On Monday, the dollar was little changed at 140.31 yen, after last week's bounce from a low of 137.67. The euro eased a touch to $1.0313, well short of the recent four-month top of $1.1481.
The US dollar index firmed 0.2% to 107.080, and away from last week's trough of 105.300.
"Given how far US bond yields and the dollar have dropped in the past couple of weeks, we think there is a good chance that they rebound if the Fed minutes are in line with the recent hawkish language from members," said Jonas Goltermann, a senior markets economist at Capital Economics.
Meanwhile, turmoil in cryptocurrencies continued unabated with the FTX exchange, which has filed for US bankruptcy court protection, saying it owes its 50 biggest creditors nearly $3.1 billion.
In commodity markets, gold was a fraction lower at $1,747 an ounce, after dipping 1.2% last week.
Oil futures failed to find a floor after last week's drubbing saw Brent lose 9% and WTI roughly 10%.
Brent shed 75 cents to $86.87, while US crude for January lost 59 cents to $79.52 per barrel.
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