The yield on 10-year US Treasury notes fell to 3.679 per cent, and 2-year Treasury yields, which typically move in step with interest rate expectations, slipped to 4.3534 per cent.
The modest recovery in stocks and bonds showed optimism about two factors that made 2022 a hellish year for investors: the constant drumbeat of rate hikes to fight inflation and China’s economy-throttling anti-COVID measures.
But investors in other assets were jittery. Oil prices fell sharply, as concerns about global demand persisted amid signs of weakening activity in the main engines of global growth: the United States, Europe and China.
“Fresh warnings about the effect of aggressive rate hikes on the US economy are rattling traders again, with the oil price continuing its march downwards,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
US crude fell 4.85 per cent to $US73.2 per barrel, while Brent was at $US78.07, down 4.9 per cent on the day.
“The market has made a pretty tentative start to the year … (and) is still grappling with the notion of what we are going to see from the Fed this year,” 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.
Hopes for less aggressive rate hikes boosted non-yielding gold, with spot prices for the precious metal hitting $US1,856.57 per ounce, their highest since mid-June.
The dollar index, which measures the greenback against six other currencies, fell 0.45 per cent as commodities currencies like the Australian dollar gained and the euro rose on the positive French and German inflation data.
Sterling was last trading at $US1.20575, up 0.75 per cent, while the euro rose 0.54 per cent to $US1.06050, coming off a three-week low of $US1.0519 touched overnight.
The Japanese yen softened against the dollar at 132.500 per dollar.
– with a staff reporter
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