In Asian Equity Markets stocks fell on Monday as investors mulled the implications of a surprise hawkish shift last week by the U.S. Federal Reserve, while the Treasury yield curve flattened further with 30-year yields falling below 2 percent. Japan’s Nikkei led declines with a 3.3 percent decrease and fell below 28,000 for the first time in a month, while the broader Topix lost 2.69 percent to 1,894.23. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1 percent in early trading.  Chinese blue chips opened 0.4 percent lower, and Australia’s benchmark slid 1.8 percent.

In Currency Markets the dollar held near multi-month peaks against other major currencies on Monday, after the U.S. Federal Reserve surprised markets last week by signalling it would raise interest rates and end emergency bond-buying sooner than expected. The euro traded at $1.1872, having hit a 2 1/2-month low of $1.1847 on Friday. The British pound fetched $1.3809, standing near Friday’s two-month low of $1.3791. The safe-haven yen held firmer as the Fed’s tilt hit risk asset prices. It ticked up to 110.185 yen to the dollar, pulling away from Thursday’s 2 1/2-month low of 110.825.

In US Equity Markets stocks ended sharply lower on Friday, with the Dow and S&P 500 posting their worst weekly performances in months, after comments from Federal Reserve official James Bullard that the U.S. central bank might raise interest rates sooner than previously expected spooked investors. The Dow fell 1.58 percent, to 33,290.08, the S&P 500 lost 1.31 percent, to 4,166.45 and the Nasdaq Composite fell 0.92 percent, to 14,030.38. The upward commodity move didn’t translate into positive sentiment for U.S. energy stocks, with the sector’s index the worst performer on the day.

In Commodities Markets gold struggled for traction in choppy trading on Friday en route to its worst week in over a year as the dollar extended its rally on the back of the U.S. Federal Reserve’s hawkish outlook. Spot gold edged 0.1 percent lower to $1,770.96 per ounce. Palladium was last down 1.8 percent at $2,451.68, while silver fell 0.2 percent to $25.86 and platinum lost 1.7 percent to $1,040.66. Brent crude futures rose 0.6 percent, to settle at $73.51 a barrel. U.S. WTI crude rose 0.8 percent, to $71.64 a barrel. Both benchmarks were headed for a weekly gain of about 1.1 percent.

In European Equity Markets a slide in European bank and energy stocks was exacerbated by hawkish comments from a Federal Reserve official, which also saw the STOXX 600 index snap a four-week winning streak as fears of U.S. policy tightening came to the fore. The pan-European STOXX 600 index ended 1.6 percent lower on Friday, in its worst day in five weeks, with bank and energy stocks leading declines. The banking sector, which typically does well when interest rates are high, fell nearly 3 percent as concerns over an eventual reduction in liquidity saw investors locking in recent gains.

In Bond Markets long-dated U.S. Treasury yields fell on Friday and the yield curve continued to flatten as market participants bet that the Federal Reserve will act sooner to clamp down on inflation pressures if they persist. Two-year yields rose to 0.2581 percent after touching 0.284 percent earlier in the day, which was the highest since April 2020. Five-year yields fell to 0.8779 percent after earlier hitting 0.962 percent, which was the highest since April 5. The yield curve between two-year and 10-year notes flattened to 122 basis points on Friday. Benchmark 10-year notes were last at 1.445 percent.

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