# Stocks, bonds extend rally on hopes rate hikes ease Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-01-04 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: Global Markets Rally on Optimistic Inflation Data Amid Rate Meta Description: Discover how stocks and bonds are rallying worldwide in 2023 after a challenging 2022, with hopes of less aggressive rate hikes and positive economic data. URL: https://financedigest.com/stocks-bonds-extend-rally-on-hopes-rate-hikes-easehtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-01-04t152022z1lynxmpej030firtroptp4usa-stocks-2023-1736814630637-compressed.jpg) By Lawrence White LONDON/NEW YORK (Reuters) – Shares rose and bonds rallied worldwide on Wednesday as investors tiptoed into the new year with tentative optimism after a brutal 2022, looking to encouraging inflation data for hope that rate hikes might be less aggressive than feared. The MSCI All-World index jumped 0.75% in early trade, helped by gains in U.S. [stocks](https://www.financedigest.com/mutual-funds-vs-stocks-which-is-better.html "stocks"). The Dow Jones Industrial Average rose 0.32%, the S&P 500 added 0.5%, and the Nasdaq Composite .IXIC climbed 0.4%. The pan-European STOXX 600 jumped 1.3% as a lower [inflation reading from France boosted](https://www.financedigest.com/inflation-boosts-jeronimo-martins-q4-profit-but-dents-margins.html "Inflation boosts Jeronimo Martins’ Q4 profit but dents margins") sentiment, building on positive data from Germany earlier in the week. Euro zone government bonds likewise extended their rally from the first two trading days of 2023, with the benchmark German 10 year yield [sliding 10 basis points on signs central banks are making progress against inflation](https://www.financedigest.com/stocks-and-gold-cheer-u-s-inflation-picture-while-dollar-slides.html "Stocks and gold cheer U.S. inflation picture, while dollar slides"). The [yield on 10-year Treasury](https://www.financedigest.com/wall-st-flutters-treasury-yields-ease-as-powell-resumes-testimony.html "Wall St flutters, Treasury yields ease as Powell resumes testimony") notes fell to 3.675%, and 2-year Treasury yields, which typically move in step with interest rate expectations, slipped 7 basis points to 4.3305%. MSCI’s broadest index of Asia-Pacific [shares outside Japan jumped 1.8% in its third straight day of gains](https://www.financedigest.com/asian-shares-gain-as-fears-about-rapid-fed-hikes-bank-crisis-fade.html "Asian shares gain as fears about rapid Fed hikes, bank crisis fade") for the year, having fallen 20% in 2022, its worst performance since 2008. The modest recovery in stocks and bonds showed optimism about two of the [factors that made 2022 such a hellish year](https://www.financedigest.com/3-factors-to-plan-for-in-2017-a-year-like-none-other.html "3 Factors to Plan for in 2017, A Year Like None Other") for investors, namely the constant drumbeat of rate hikes to fight inflation and China’s economy-throttling anti-COVID measures. But jitters in other assets showed the path ahead will be far from smooth, as policymakers [try to balance encouraging economic growth with keeping a lid on inflation](https://www.financedigest.com/factbox-how-governments-are-trying-to-ease-inflation-pain.html "Factbox-How governments are trying to ease inflation pain"). [Oil prices](https://www.financedigest.com/shares-fall-with-oil-prices-amid-concerns-about-u-s-fed-rate-hikes.html "Shares fall with oil prices amid concerns about U.S. Fed rate hikes") fell sharply, as concerns about global demand persisted amid signs of weakening activity in the main engines of growth such as the United States, Europe and China. Fresh warnings about the effect of aggressive [rate hikes](https://www.financedigest.com/wall-street-slips-dollar-gains-as-fed-seen-hiking-rates-in-may.html "Wall Street slips, dollar gains as Fed seen hiking rates in May") on the U.S. economy are rattling traders again, with the [oil price](https://www.financedigest.com/oil-prices-stable-heading-for-weekly-gain.html "Oil prices stable, heading for weekly gain") continuing its march downwards,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. U.S. crude fell 3.3% to $74.41 per barrel, while Brent was at $79.52, down 3.2% on the day. FED UP The positive market momentum in [stocks on Wednesday was a prelude to a key data](https://www.financedigest.com/stocks-yields-fall-data-suggests-u-s-economy-cooling.html "Stocks, yields fall; data suggests U.S. economy cooling") release that could shift momentum back the other way. Minutes from the U.S. Federal Reserve’s December meeting, when it cautioned [rates may need to stay higher](https://www.financedigest.com/dollar-jumps-as-powell-flags-higher-terminal-rate.html "Dollar jumps as Powell flags higher terminal rate") for longer, are due to be released at 1900 GMT. [Investors will parse the minutes](https://www.financedigest.com/shares-choppy-u-s-yields-fall-as-investors-digest-fed-minutes.html "Shares choppy, U.S. yields fall as investors digest Fed minutes") to figure out whether more policy tightening is likely, as well as scanning U.S. [job openings data](https://www.financedigest.com/stocks-mixed-dollar-gains-after-robust-inflation-jobs-data.html "Stocks mixed, dollar gains after robust inflation, jobs data") at 1500 GMT. The [market has made a pretty tentative start to the year](https://www.financedigest.com/the-next-upcoming-years-to-see-the-gastric-electric-stimulators-market-grow-kinetically.html "The Next Upcoming Years To See The Gastric Electric Stimulators Market Grow Kinetically") … (and) is still grappling with the notion of what we are going to [see from the Fed this year,”](https://www.financedigest.com/10-year-david-goliath-crusade-finally-sees-justice-for-off-plan-spanish-property-buyers.html "10 year ‘David & Goliath’ crusade finally sees justice for off-plan Spanish property buyers") said Rob Carnell, head of ING’s Asia-Pacific research. “There are two camps out there and they are wrestling for dominance in terms of the view. Some days higher-for-longer wins, some days (the) higher-then-lower camp wins,” Carnell said. The U.S. [central bank said last month when it raised interest rates](https://www.financedigest.com/central-banks-keep-hiking-rates-amid-banking-turmoil.html "Central banks keep hiking rates amid banking turmoil") by 50 basis points that the terminal rate may need to remain higher for longer to fight inflation. Markets, however, are [pricing in rate cuts](https://www.financedigest.com/tesla-posts-record-quarterly-deliveries-after-price-cuts-up-4-from-q4.html "Tesla posts record quarterly deliveries after price cuts, up 4% from Q4") for late 2023, with fed fund futures implying a range of 4.25% to 4.5% by December. Hopes for less aggressive rate hikes boosted non-yielding gold, with spot prices for the [precious metal](https://www.financedigest.com/u-s-money-reserve-reviews-real-talk-about-diversifying-with-precious-metals.html "U.S. Money Reserve Reviews: Real Talk About Diversifying With Precious Metals") hitting $1,858 per ounce by 1148 GMT, their highest since mid-June. The dollar index, which measures the greenback against six other currencies, meanwhile, fell 0.6% as commodities currencies like the Australian dollar gained and the euro rose on the positive French and German [inflation data](https://www.financedigest.com/european-shares-rise-as-us-inflation-data-signals-end-of-rate-hike-cycle.html "European shares rise as US inflation data signals end of rate-hike cycle"). Sterling was last trading at $1.2052, up 0.7%, while the euro rose 0.65% to $1.06190, coming off a three-week low of $1.0519 touched overnight. The Japanese [yen was flat versus the greenback at 131.055 per dollar](https://www.financedigest.com/yen-sinks-as-rates-outlook-diverges-nz-dollar-tumbles.html "Yen sinks as rates outlook diverges; NZ dollar tumbles"). (Reporting by Lawrence White and Ankur Banerjee; Editing by Chizu Nomiyama and Mark Potter) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---