Futures contracts for the Euro Stoxx 50 index dropped while equity benchmarks in Japan, China, Australia and South Korea fell on thin trading volume Thursday. Hong Kong tech stocks were among the hardest hit. Contracts for the S&P 500 fluctuated after the index slid 1.2% to the lowest level in more than a month.

New Zealand 10-year government bond yields climbed while Treasury yields of the same maturity steadied after rising in the prior session. The yen strengthened as the Bank of Japan’s announcement of unscheduled rounds of bond purchases failed to ease speculation that the central bank would further pare its stimulus.

Appetite for risk waned on news that the US would require inbound airline passengers from China to show a negative Covid-19 test prior to entry. In Italy, health officials said they would test arrivals from China and said almost half of passengers on two flights from China to Milan were found to have the virus.

The prospect of further pandemic disruption to fragile supply chains as central banks grapple to bring inflation under control damped sentiment in the final trading week of 2022 after a brutal year for financial markets. Global equities have lost a fifth of 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 3.8% from just 1.5% at the end of 2021.

Hong Kong removed limits on gatherings and testing for travelers in a further unwinding of its last major Covid rules, offering a boost to the global economy but sparking concerns it would amplify inflation pressures and prompt US policy makers to maintain tight monetary settings.

China’s reopening “complicates the Fed’s job with respect to putting a little bit of a bid under oil prices, putting a little bit of a bid under inflation globally, to aggregate demand,” said Sameer Samana, senior global market strategist for Wells Fargo Investment Institute, on Bloomberg TV. “That’s going to be one of the biggest things that we’ll be watching in the first half.”

Data released Wednesday showed the Federal Reserve’s aggressive tightening policy has taken a toll on the housing market. US pending home sales fell for a sixth consecutive month in November to the second-lowest on record. Borrowing costs have roughly doubled since the start of the year and home sales have been declining for months.

Elsewhere in markets, oil dipped amid thin liquidity as investors weighed the fallout from a Russian ban on exports to buyers that adhere to a price cap.

“We expect the economy to slow materially or enter recession at some point in 2023,” wrote Nancy Tengler, CEO and chief investment officer at Laffer Tengler Investments.

“A severe recession would be bearish for stocks, yet given the resilience of the US economy and the tight labor market, we are expecting a slowdown or shallow and brief recession. That could allow stocks to rally in the second half of 2023,” she said.

Key events this week:

• US initial jobless claims, Thursday

• ECB publishes economic bulletin, Thursday

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 3:26 p.m. Tokyo time. The S&P 500 fell 1.2%

• Nasdaq 100 futures rose 0.3%. The Nasdaq 100 fell 1.3%

• Japan’s Topix Index fell 0.7%

• Hong Kong’s Hang Seng fell 1%

• The Shanghai Composite fell 0.3%

• Euro Stoxx 50 futures fell 0.3%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%

• The euro was little changed at $1.0622

• The Japanese yen rose 0.6% to 133.68 per dollar

• The offshore yuan rose 0.4% to 6.9685 per dollar

Bonds

• The yield on 10-year Treasuries declined two basis points to 3.86%

• Japan’s 10-year yield was little changed at 0.46%

• Australia’s 10-year yield was little changed at 4.03%

Commodities

• West Texas Intermediate crude fell 0.7% to $78.41 a barrel

• Spot gold rose 0.3% to $1,809.08 an ounce