Australia

Australian shares are set to open higher today following Wall Street’s lousy first session of 2023. Despite optimism about China’s reopening, anxiety over inflation and a possible recession in the US continues to weigh on investors.

ASX futures were up 53 points or 0.76% at 7008 as of 7:00am on Wednesday, pointing to a rise at the open.

US stocks edged lower Tuesday after investors closed out 2022 with punishing losses.

Near the end of the session, the S&P 500 fell 0.55% despite opening slightly higher. Last year the index logged its biggest decline since 2008, the year Lehman Brothers collapsed. The tech-focused Nasdaq Composite lost 0.8% and the Dow Jones Industrial Average slipped 0.26%.

Nine out of the S&P 500's eleven sectors fell, with energy leading the decliners and the communication services sector being the sole bright spot.

"Today's price action is indicative of investors that are still worried about growth and earnings," said Scott Ladner, chief investment officer at Horizon Investments.

Investors are wary of what 2023 may bring. Inflation -- and the lengths that central bankers are willing to go to tame it -- will remain a focus. The Federal Reserve has signaled plans to lift interest rates through the spring, although some traders, expecting that the US could slip into a recession, are betting that policy makers will pivot to cutting rates. Investors are also assessing what China's border reopening and wider shift from its previous strict stance on Covid-19 will mean for markets.

In commodity markets, Brent crude oil lost 4.5% to $US82.04 a barrel while gold added 0.84% to US$1,839.28.

In local bond markets, the yield on Australian 2 Year government bonds rose to 3.42% while the 10 Year edged down to 4.00%. Overseas, the yield on 2 Year US Treasury notes

increased to 4.40% and the yield on 10 Year US Treasury notes rose to 3.79%.

The Australian dollar hit 67.41 US cents down from the previous close of 67.99. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, edged up to 97.27.

Asia

Chinese shares closed higher in the first trading day of 2023, erasing their early losses and outperforming regional markets. The turnaround came after the release of a private gauge of China's factory activity, which indicated a sharper contraction in activity in December. It boosted investors' confidence that the central bank will stimulate the sluggish economy given Beijing's pro-growth stance. Shares of big state-owned companies led the gainers. China Unicom rose by its 10% daily limit, China Communications Construction Co. advanced 2.9% and Ping An Insurance increased 4.6%. Travel stocks and consumption-related companies dropped. Shanghai International Airport declined 2.5% and Shanxi Xinghuacun Fen Wine Factory lost 3.2%. The Shanghai Composite Index rose 0.9% to 3116.51. The Shenzhen Composite Index was up 1.4% and the ChiNext Price Index gained 0.4%.

Hong Kong stocks ended the day higher, as the market picked up from early losses amid cross-sector gains. The benchmark Hang Seng Index rose 1.8% to settle at 20145.29, its highest closing since August. A wide range of sectors jumped to boost the market. Chinese state-owned telecommunications company China Unicom surged 7.3% as investor hopes continued to rise on potentially strong revenue growth from its new businesses and broad optimism over China's domestic tech supply chain outlook. Auto maker BYD advanced 4.7%, biotech company Wuxi Biologics was up by 4.5% and Macau casino operator Galaxy Entertainment rose 3.9%.

The Tokyo Stock Exchange was closed for a market holiday on January 3.

Europe

European stocks rallied Tuesday, extending gains seen in the previous session, as US equities were expected to open higher. The pan-European Stoxx Europe 600 rose 1.22%, the German DAX gained 0.8% and the French CAC 40 advanced 0.44%. Travel and food delivery stocks were among the biggest gainers in the Stoxx 600 index.

With a lack of major macroeconomic news Tuesday, it's "hard to say if the current price action is being driven by real directional motivations from portfolio managers or if it is just a liquidity bull trap, covering some of last year's short positions," ActivTrades analyst Pierre Veyret wrote. Short positions bet on an asset price falling.

The British FTSE 100 rose 1.37% on the first trading day of 2023 for the London stock market as investors expected a higher open on Wall Street. Energy stocks including BP and Shell were among the top performers on the FTSE 100 as oil prices climbed.

The possibility of increased Asian travel following China's easing of Covid-19 restrictions has "also boosted the likes of International Consolidated Airlines and Rolls-Royce, while the initial risk-on approach came at the slight expense of the more defensive sectors," Interactive Investor analyst Richard Hunter wrote.

North America

US stocks edged lower Tuesday after investors closed out 2022 with punishing losses.

Near the end of the session, the S&P 500 fell 0.55% despite opening slightly higher. Last year the index logged its biggest decline since 2008, the year Lehman Brothers collapsed. The tech-focused Nasdaq Composite lost 0.8% and the Dow Jones Industrial Average slipped 0.26%.

Nine out of the S&P 500's eleven sectors fell, with energy leading the decliners and the communication services sector being the sole bright spot.

"Today's price action is indicative of investors that are still worried about growth and earnings," said Scott Ladner, chief investment officer at Horizon Investments.

Investors are wary of what 2023 may bring. Inflation -- and the lengths that central bankers are willing to go to tame it -- will remain a focus. The Federal Reserve has signaled plans to lift interest rates through the spring, although some traders, expecting that the US could slip into a recession, are betting that policy makers will pivot to cutting rates. Investors are also assessing what China's border reopening and wider shift from its previous strict stance on Covid-19 will mean for markets.

"Markets have been vacillating about getting optimistic about inflation and China, and getting worried about growth," said Altaf Kassam, head of investment strategy and research for Europe, the Middle East and Africa at State Street Global Advisors. "We're going to have this pattern of a few up days and a few down days."

That is likely to spell more volatility for the start of the year, he said. Investors may also be rebalancing their portfolios toward stocks at the start of the year after Treasurys suffered a bruising 2022.

Tesla was a notable mover, dropping 12.1%, after the electric vehicle maker fell short of its 2022 delivery target. Tesla stock suffered its worst-ever year in 2022, declining 65%.