Turkey's foreign minister did say on Sunday that Russia and Ukraine were nearing agreement on "critical" issues and he was hopeful for a ceasefire. 

Investors were also anxiously waiting to see if Russia would meet more interest repayments this week. It must pay US$615 million in coupons this month while on April 4, a $2 billion bond comes due. 

Most share markets rallied last week in anticipation of an eventual peace deal on Ukraine, but it could take actual progress to justify further gains.

President Joe Biden travels to Europe on Thursday to meet NATO allies and will visit Poland on Friday. 

Bank of America's global fund manager survey had a bearish tinge with cash levels the highest since April 2020 and global growth expectations the lowest since the financial crisis of 2008.

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Long oil and commodities were the most crowded trade, and vulnerable to a pullback.

Trade was sluggish with Japan on holiday, leaving S&P 500 stock futures down 0.3 percent and Nasdaq futures 0.4 percent. EUROSTOXX 50 futures dipped 0.1 percent and FTSE futures edged up 0.1 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan was flat. Japan's Nikkei was shut, but futures traded around 200 points above the cash close.

Chinese blue chips firmed 0.1 percent, with investors waiting on further details of possible stimulus from Beijing.

Bond markets were braced for more hawkish language from the Federal Reserve with Chair Jerome Powell speaking on Monday, and at least half a dozen other members through the week.

Policy makers have flagged a string of hikes ahead to take the funds rate to anywhere from 1.75 percent to 3.0 percent by year end. The market implies a 50-50 chance of a half point hike in May and an even greater chance by June.

"In balancing the near-term upside risks to inflation with the downside risks to growth, central banks are sending a clear and strong signal that policy is on a path to normalise," said JPMorgan chief economist Bruce Kasman.

"However, a sustained cut-off of Russian energy supply would push inflation substantially higher, magnifying an already severe squeeze on US consumer purchasing power," he warned, adding it would likely throw the Euro area into recession.

"Under this scenario, policy normalisation would come to a halt across the world."

Curves flattened

The market seems aware of the risks to growth given the marked flattening of the Treasury yield curve of recent weeks. The spread between two- and 10-year yields has shrunk to just 21 basis points, the smallest since the start of the pandemic in early 2020.

Higher Treasury yields have helped lift the US dollar on the yen, where the Bank of Japan remains committed to keeping yields near zero. The dollar was up near its highest since early 2016 at 119.18 yen, having climbed 1.6 percent last week.

The dollar had less luck elsewhere, in part because history shows the currency tends to decline once the Fed has begun a tightening campaign.

The euro was holding at $1.1045 on Monday, after bouncing 1.3 percent last week. The dollar index stood at 98.270, off its recent peak at 99.415.

Joseph Capurso, head of international economics at Commonwealth Bank of Australia, noted flash manufacturing (PMI) surveys from Europe would be a hurdle for the euro this week.

"Europe is most exposed to lower supply from, and higher prices for, gas and agricultural imports from Russia and Ukraine," he said. "A fall in the Eurozone PMI into contractionary territory could push EUR/USD back closer to its war low of $1.0806 again."

In commodity markets, gold has failed to get much of a lift from safe-haven flows or inflation concerns, losing more than 3 percent last week. It was last up 0.3 percent at $1,927 an ounce.

Oil prices also lost ground last week, but were pushing higher on Monday as there was no easy replacement for Russian barrels in a tight market.

Brent was quoted $2.85 higher at $110.78, while US crude rose $2.90 to $107.60 a barrel.

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