# Weary Wall Street cheers improved consumer confidence
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-12-21
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: Global Stock Markets Rise on Strong U.S. Consumer
Meta Description: Track the market's positive momentum following the Bank of Japan's surprise decision, with leading indexes and key indicators on the upswing.
URL: https://financedigest.com/weary-wall-street-cheers-improved-consumer-confidencehtml

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By Lawrence Delevingne and Amanda Cooper

(Reuters) -Global stock markets rose on Wednesday, as U.S. consumer confidence rebounded in December, and the dollar regained stability after the Bank of Japan rocked markets with a surprise decision to [loosen its grip](https://www.financedigest.com/departing-intel-exec-to-focus-on-loosening-nvidias-grip-on-ai-for-movies-games.html "Departing Intel exec to focus on loosening Nvidia’s grip on AI for movies, games") on government bond yields.

The MSCI All-World index rose about 1.2% on the day, although it is on track for a more than 3% decline in December. This year, the index is set to have fallen for eight out of 12 months, on a par only with 2008 for the number of [monthly losses](https://www.financedigest.com/investors-flee-uk-bonds-pushing-gilts-to-huge-monthly-loss.html "Investors flee UK bonds, pushing gilts to huge monthly loss") in a calendar year on record.

[Wall Street’s](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") main stock indexes also rallied on Wednesday, with the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite all up between 1.4% and 1.6%. They were [boosted by The Conference Board’s improving consumer confidence](https://www.financedigest.com/how-the-epa-plans-to-boost-confidence-in-the-uk-payments-industry-post-brexit.html "How the EPA plans to boost confidence in the UK payments industry post Brexit") index, and stronger-than-expected earnings at sportswear giant Nike and delivery behemoth FedEx Corp.

In Europe, shares more than recovered the previous day’s 0.4% drop, helped in part by a [rally in sportswear stocks](https://www.financedigest.com/asian-stocks-rally-as-bank-jitters-calm-alibaba-lifts-mood.html "Asian stocks rally as bank jitters calm, Alibaba lifts mood").

On Tuesday, the Bank of Japan (BOJ) widened its trading band for 10-year government [bond yields](https://www.financedigest.com/wall-st-stocks-fall-bond-yields-rise-as-china-drops-quarantine-rule.html "Wall St stocks fall, bond yields rise as China drops quarantine rule") from 25 basis points (bps) either side of zero to 50 bps.

That pushed the [yen to its biggest one-day gain](https://www.financedigest.com/yen-trims-gains-as-possible-next-boj-governor-says-current-policy-appropriate.html "Yen trims gains as possible next BOJ governor says current policy appropriate") against the U.S. [dollar in 24 years](https://www.financedigest.com/dollar-creeps-up-in-subdued-start-to-new-year.html "Dollar creeps up in subdued start to new year"). The currency had fallen for most of the year because of Japan’s low yields, as well as selling in the Japanese [stock market and a sell-off for bonds around the world](https://www.financedigest.com/world-stocks-cling-to-upbeat-mood-dollar-stalls.html "World stocks cling to upbeat mood, dollar stalls").

The [dollar regained about 0.5%](https://www.financedigest.com/sterling-rises-0-5-as-dollar-takes-a-breather.html "Sterling rises 0.5% as dollar takes a breather") against the yen in U.S. trading on Wednesday.

The decision by the BOJ, the last dove of the major central banks, has added to [concern among investors about how the impact of rising interest rates and persistent inflation](https://www.financedigest.com/shares-rise-but-concern-mounts-over-inflation-flare-up.html "Shares rise, but concern mounts over inflation flare-up") will affect the global economy.

Fund [managers are adopting](https://www.financedigest.com/adopting-ai-balancing-automation-with-risk-management.html "Adopting AI: balancing automation with risk management") an extremely cautious approach to the start of 2023 and, as such, trading conditions are thin and highly volatile.

“We think recessions are coming in the U.S. and Europe, but it’s very hard to gauge the amplitude of these recessions right now. This makes it very hard to evaluate earnings potential for 2023, and so it is also very hard to do the usual reasoning about valuations,” said Bastien Drut, chief thematic macro strategist at CPR, a unit of Amundi, Europe’s largest [asset manager](https://www.financedigest.com/britains-post-brexit-asset-management-revamp-eyes-liquidity-tokenisation.html "Britain’s post-Brexit asset management revamp eyes liquidity, tokenisation").

We’ve taken [profits from the rally in November and our positioning in equities is rather low,”](https://www.financedigest.com/samsungs-quarterly-profit-plunges-to-8-year-low-on-demand-slump.html "Samsung’s quarterly profit plunges to 8-year low on demand slump") he said.

In Europe, the STOXX 600 rose about 1.7%, led by the retail sector, including Nike’s [German rivals](https://www.financedigest.com/german-automakers-fight-to-defend-their-turf-from-chinese-rivals.html "German automakers fight to defend their turf from Chinese rivals") Adidas and Puma. London’s [FTSE 100 also gained](https://www.financedigest.com/ftse-100-opens-higher-informa-leads-gains.html "FTSE 100 opens higher, Informa leads gains") about 1.7%.

The dollar, meanwhile, crept 0.2% higher against a basket of major currencies, which in turn nudged the gold price off six-month highs, while crude [oil bounced by nearly 3% following data](https://www.financedigest.com/oil-slumps-on-economic-data-stronger-u-s-dollar.html "Oil slumps on economic data, stronger U.S. dollar") that showed a pickup in weekly demand.

Some of the major drivers of dollar [gains – an ever-weaker yen](https://www.financedigest.com/japanese-yen-gains-as-ueda-set-to-be-named-next-boj-governor.html "Japanese yen gains as Ueda set to be named next BOJ governor"), a struggling Chinese yuan and outsized rises in U.S. [yields – are starting to shift](https://www.financedigest.com/stocks-fall-bond-yields-rise-as-focus-shifts-to-fed-rate-outlook.html "Stocks fall, bond yields rise as focus shifts to Fed, rate outlook"). The euro held steady at around 1.061, not far from last week’s six-month high. \[FRX/\]

CARRY TRADES

[Bond markets](https://www.financedigest.com/britains-bond-market-turmoil.html "Britain’s bond market turmoil") were kept under pressure.

Many now expect some of those in overseas markets that relied on Japan’s [yields will have to shed some of those “carry” trades to make up for a rising](https://www.financedigest.com/stocks-fall-treasury-yields-rise-upon-final-2022-trading-day.html "Stocks fall, Treasury yields rise upon final 2022 trading day") yen.

[Aussie bonds](https://www.financedigest.com/aussie-dollar-firm-as-bonds-tumble-yen-looks-past-boj.html "Aussie dollar firm as bonds tumble, yen looks past BOJ") sold off heavily and Asian currencies, such as the Singapore dollar, also weakened.

There appears to be growing caution about inadvertent ‘risk-off’ from unwinding ‘carry’ and knock-on impact in [risk assets,”](https://www.financedigest.com/analysis-watch-out-risk-assets-the-rout-in-bonds-is-coming-your-way.html "Analysis-Watch out risk assets, the rout in bonds is coming your way") analysts at Mizuho wrote.

Citi analysts said the calm in equity markets might not last, and thin, year-end trading could lead to volatility.

Our equity [traders caution that the most under-priced market](https://www.financedigest.com/analysis-bond-traders-get-their-swagger-back-in-rate-obsessed-markets.html "Analysis-Bond traders get their swagger back in rate-obsessed markets") risks are roughly how high the structural inflation floor will settle in a post-COVID world.

We know the [Fed is resolutely committed to seeing inflation](https://www.financedigest.com/wall-st-seen-steady-ahead-of-inflation-data-fed-later-in-week.html "Wall St seen steady ahead of inflation data, Fed later in week") taper down to 2% and stay there, which suggests it may need to create a lot more pain than markets currently discount in order to reach its target,” they said in a note.

[Treasury yields](https://www.financedigest.com/wall-street-drops-treasury-yields-gyrate-on-fed-chairman-powells-remarks.html "Wall Street drops, Treasury yields gyrate on Fed Chairman Powell’s remarks") were steady, with benchmark 10-year Treasury yields down 1.3 basis points to 3.671%, as investors waited on inflation data due on Friday for further clues about whether price pressures are continuing to moderate. Japanese 10-year yields closed up 7 bps at 0.48%, close to the BOJ’s 0.5% ceiling. \[JP/\]

[Oil prices](https://www.financedigest.com/oil-prices-stable-heading-for-weekly-gain.html "Oil prices stable, heading for weekly gain") rose by nearly 3% on Wednesday after data suggested a larger-than-expected draw in U.S. crude stockpiles, but gains were capped by growing concerns over demand in China and a snowstorm that is [expected to hit](https://www.financedigest.com/uks-dominos-expects-tech-investments-to-hit-2023-profit.html "UK’s Domino’s expects tech investments to hit 2023 profit") U.S. travel.

Gold prices were [little changed](https://www.financedigest.com/stocks-dollar-little-changed-as-inflation-data-sends-mixed-signals.html "Stocks, dollar little changed as inflation data sends mixed signals") on Wednesday, holding above the key $1,800 level, as expectations of slower U.S. [rate hikes](https://www.financedigest.com/ecbs-villeroy-rate-hike-signals-strong-confidence-in-european-banks.html "ECB’s Villeroy: rate hike signals strong confidence in European banks") lent support, but the rise in the dollar capped further gains.

(Reporting by Lawrence Delevingne in Boston and Amanda Cooper in London. Additional reporting by Naomi Rovnick in London and Tom Westbrook and Vidya Ranganathan in Singapore. Editing by Barbara Lewis, Jonathan Oatis and Lisa Shumaker)


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