Equity benchmarks in Japan and Australia declined and South Korea’s Kospi tumbled about 2%. Futures contracts for the S&P 500 were flat after the US benchmark fell 0.4% Tuesday on thin volumes in a decline led by tech stocks. Mainland China shares fluctuated and Hong Kong stocks rose on reports the Chinese government may scrap further Covid-19 curbs.

Australia’s 10-year bond yield jumped 21 basis points and similar-maturity Treasury yields held their increase from Tuesday when they climbed nine basis points. The dollar was little changed and the yen weakened after the Bank of Japan announced additional unscheduled bond purchases to cap yields.

The cautious sentiment damped investor optimism for a rally in the last trading week of 2022 to cap a brutal year for financial markets. Global equities have lost a fifth of their value, the largest decline since 2008 on an annual basis, and an index of global bonds has slumped 16%. The dollar has surged 7% and the US 10-year yield has jumped to above 3.80% from just 1.5% at the end of 2021.

Reports that China would drop quarantine requirements for inbound visitors and begin issuing passports and Hong Kong travel permits to mainland residents increased concern about global inflation pressures.

“We may get a pivot later on next year from the Federal Reserve where they actually start cutting rates, but that’s going to happen when the situation is going to become much more dire than it is now,” Matt Maley, chief market strategist for Miller Tabak + Co, said on Bloomberg TV. “If we just have this slow grind lower, the Fed’s going to keep interest rates at high levels even if they stop raising rates in any kind of way.”

China’s reopening buoyed the outlook for oil, which clung to a three-week high, and came as Russia imposed some restrictions on crude exports to foreign buyers that adhere to a price cap.

Iron ore surged to its highest since early August, while copper gained in New York. Gold edged higher, trading above US$1,800 an ounce.