Asian stock markets tumbled on Wednesday as investors braced for strong monetary tightening by the US Federal Reserve to combat inflation, as well as further Western sanctions against Russia for its invasion of Ukraine.

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US Treasury rates rose to multi-year highs, and stock markets fell after Fed Governor Lael Brainard indicated overnight that a combination of interest rate hikes and a quick balance sheet runoff would bring US monetary policy to a “more neutral position” later this year.

Japan’s Nikkei sank 1.5 %in early Asian trade, while South Korean equities slid 0.8% and Australian shares fell 1.2%.

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After two days of public holidays, markets in mainland China were ready to reopen. Despite mounting outrage about quarantine laws in the city, Chinese officials extended a lockdown in Shanghai on Tuesday to encompass all of the city’s 26 million residents.

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The immediate focus of investors on Wednesday will be the release of a private services sector activity index in China, with the main event later in the day being the release of minutes from the Fed’s most recent policy meeting, according to Reuters.

Investors are anticipated to scrutinize the minutes for hints on the possibility of a 50 basis point raise at the next meeting of the US Federal Reserve in May.

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The yield on benchmark 10-year Treasury notes rose further, reaching a two-year high of 2.61% before falling slightly. The dollar index reached 99.587, the highest level since late May 2020.

Given the Bank of Japan’s confidence and repeated action last week to keep the yield on 10-year Japanese government bonds below 0.25%, the dollar was also trading steady against the yen at 123.90 yen. The euro was 0.1% lower at $1.0892. Spot gold fell 0.3% to $1,917.92 per ounce.

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Despite persistent supply issues, oil prices decreased as a result of the rising dollar and mounting worry that additional coronavirus cases might restrict demand.

The price of US crude was down 0.8% at $101.13 per barrel. Brent crude futures were down 0.7% at $105.89 per barrel.