Stock markets were mixed on Monday with hopes for some progress in ceasefire talks between Russia and Ukraine this week tempered by a phased lockdown in Shanghai that led to fresh concerns about already strained supply chains.

Growing expectations that the Federal Reserve will become increasingly aggressive in its drive to bring down inflation continue to dampen sentiment, with Treasury yields – a gauge of future interest rates – surging.

With the war in Ukraine now in its second month, investors are hoping the two sides will be able to make inroads on ending the crisis when they meet in Turkey, either on Monday or Tuesday.

Ukraine President Volodymyr Zelensky said he hoped they would bring peace “without delay”, despite several previous rounds failing to overcome disagreements about Kyiv’s alignment with the West and Russia’s occupation of eastern parts of the country.

But there is a hope that Moscow could be willing to de-escalate as its troops struggle to break dogged resistance from its much smaller opponent.

Zelensky has previously indicated he is “carefully” considering a Russian demand of Ukrainian “neutrality”. Russian President Vladimir Putin ordered the February invasion to destroy Ukraine’s military and topple the pro-Western Zelensky, bringing the country under Moscow’s sway. But senior general Sergei Rudskoi suggested a considerably reduced “main goal” of controlling Donbas, an eastern region already partly held by Russian proxies.

While the sliver of hope for a ceasefire is providing some support to markets, concerns about China’s economy continue to keep optimism in check.

While the sliver of hope for a ceasefire is providing some support to markets, concerns about China’s economy continue to keep optimism in check

Shanghai, the country’s biggest city and financial hub, will launch a phased lockdown to curb an Omicron outbreak, with the east shutting down from Monday to Friday, followed by a similar measure in the west from April 1.

The news impacted oil prices as traders weighed a possible hit to demand in the world’s biggest crude consumer. Both main contracts were sharply down on Monday, though they remain elevated by ongoing concerns about supplies caused by the war in eastern Europe.

Still, equity markets were mixed, with Hong Kong rebounding after suffering hefty losses on Friday, while Shanghai ended slightly higher. Sydney, Singapore, Manila, Bangkok and Jakarta were also on the front foot, though Tokyo, Mumbai, Taipei and Wellington fell. Seoul was flat. London, Paris and Frankfurt all opened higher.

“With a light calendar, Asia seems content at the moment to wait and see how the week evolves elsewhere,” said OANDA’s Jeffrey Halley. “A worsening COVID-19 situation in China, and wider restrictions, would be a serious headwind for Asian equities as a whole.”

While stock markets have managed to remain resilient in the face of heightened uncertainty, concerns that the Fed will ramp up interest rates continue to cast a pall. Wall Street banks have called for several half-point rises before the end of this year, with Citi looking for a 3.75 per cent rate by January 2023 and Bank of America 3.25 per cent.

The push for tighter borrowing costs comes as inflation sits at a 40-year high in the United States, while other central banks have been forced to act quicker and harder on rates as they see prices soar.

“It will be hard for the behind-the-curve Fed to calibrate a response that succeeds in reining inflation in, without hurting growth and the labour market too much,” warned Silvia Dall’Angelo of Federated Hermes. “History does not provide much comfort either, showing that Fed’s hiking cycles ended with a recession 80 per cent of the time since the 1970s.”