Investing.com - Global stocks saw a modest rise on Tuesday, while the US dollar continued to hover near its five-month low. This cautious optimism among investors is primarily driven by the expectation that potential reductions in U.S. inflation will prompt the Federal Reserve to slash interest rates in the upcoming year.
Oil prices witnessed a significant jump of over 3%, reaching their highest point in nearly a month. This surge was supported by conflicts in the Middle East and investor optimism that prospective rate cuts could spur global economic growth and increase fuel demand.
Trading activity was relatively subdued the day after Christmas, with many markets, including those in Australia, Hong Kong, Britain, and Germany, closed for Boxing Day.
The MSCI's global stock index saw a 0.31% increase. On Wall Street, both the Dow Jones Industrial Average and the S&P 500 rose by 0.38%, while the Nasdaq Composite edged up by 0.44%.
A recent report by Mastercard (NYSE:MA) indicated that the U.S. economy is demonstrating resilience. According to the report, U.S. retail sales increased by 3.1% between November 1 and December 24. However, this growth rate is lower than the previous year's 7.6% rise.
The yield on 10-year Treasury notes remained unchanged at 3.908%, while the two-year U.S. Treasury yield went up 3.7 basis points to 4.377%.
U.S. crude experienced a 3.3% increase to $75.97 per barrel, while Brent crude stood at $81.49, marking a 3.06% rise.
The dollar index remained steady at 101.55, close to a five-month low of 101.42 recorded last Friday. A weaker dollar contributed to a 0.25% increase in the euro, lifting it to $1.1034.
Investors continue to analyze data released last Friday, which showed a drop in U.S. prices in November, the first decline in over three and a half years. This underscores the resilience of the U.S. economy.
The Fed's recent signals on the rate outlook have been positively received by stock investors. After its policy meeting on December 13, the Fed indicated that it had concluded its tightening cycle and is considering interest rate cuts in the upcoming year.
The markets now anticipate a 75% probability of a 25 basis point rate cut from the Fed in March, as per the CME FedWatch tool. This is a significant increase from the 21% chance predicted at the end of November. The markets also foresee over 150 basis points of rate cuts next year.
In Asia, Chinese stocks fell by 0.47% due to the impact on semiconductor shares, while gaming stocks stabilized following a series of share buyback plans announced by various companies. Japan's Nikkei index rose by 0.16% and continues to be the best performing major Asian stock market with a 27% rise in 2023.
The yen remained steady against the dollar at 142.47 per dollar, offsetting some of its recent gains made on the prospect of the Bank of Japan ending its ultra-easy policy soon.
Spot gold saw a slight increase of 0.2% to $2,056.69 an ounce, while Bitcoin experienced a 3.9% decline to $41,