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Global stocks rise as U.S. consumer confidence rebounds

written by Bella Palmer

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

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 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 in a calendar year on record.

Wall Street's 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 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.

On Tuesday, the Bank of Japan (BOJ) widened its trading band for 10-year government bond yields from 25 basis points (bps) either side of zero to 50 bps.

That pushed the yen to its biggest one-day gain against the U.S. dollar in 24 years. 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.

The dollar regained about 0.5% 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 will affect the global economy.

Fund managers are adopting 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.

We’ve taken profits from the rally in November and our positioning in equities is rather low, he said.

In Europe, the STOXX 600 rose about 1.7%, led by the retail sector, including Nike's German rivals Adidas and Puma. London's FTSE 100 also gained 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 that showed a pickup in weekly demand.

Some of the major drivers of dollar gains - an ever-weaker yen, a struggling Chinese yuan and outsized rises in U.S. yields - are starting to shift. The euro held steady at around 1.061, not far from last week's six-month high.


The opinions expressed by our writers are their own and do not represent the views of UK Investment Guides. The information provided on UK Investment Guides is intended for informational purposes only. UK Investment Guides is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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