Australia

The Australian sharemarket is poised for a positive start to the new year, with ASX futures pointing 0.5% higher as of 8am Tuesday.

The S&P/ASX200 ended 2022 with a fourth-consecutive weekly decline that rounded out its worst annual performance since 2018. The ASX 200 finished the year 5.45% lower.

Offshore, US markets were closed on Monday for the public holiday.

In commodity markets, Brent crude oil rose to $US85.91 a barrel, while gold rose 0.5% to US$1,824.02.

In local bond markets, the yield on Australian 2 Year government bonds was 3.38% while the 10 Year was 4.02%. Overseas, the yield on 2 Year US Treasury notes 4.43% while the yield on 10 Year US Treasury notes was 3.87%.

The Australian dollar sits at 68.09 US cents. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies inched up to 96.69.

Asia

Most Asian markets remained closed for the public holiday, with South Korea's benchmark Kospi falling 0.5% on the first trading day of the year, reversing early gains.

On the final trading day of 2022, Japan's Nikkei Stock Average closed flat as gains in retail and financial stocks help offset losses in electronics and tech shares. The Japanese equity index fell 9.4% in 2022 following three consecutive years of gains.

Chinese shares were mixed in the final trading day of 2022 and ended the year 15% lower. On the day, the Shanghai Composite Index climbed 0.5%, the Shenzhen Composite Index added 0.4%, and the ChiNext Price Index was 0.1% lower.

Hong Kong shares ended the last day of the year 0.2% higher at 19781.41, but closed 2022 down 15% versus at the end of 2021. This marks the biggest annual loss since 2011, according to FactSet, as China's zero-covid policy for much of the year, together with a crackdown on the tech sector and an overheating property market damped economic growth.

Europe

European shares started 2023 higher, with the Stoxx Europe 600 rebounding after recent losses but staying within the relatively tight range traded over the end-of-year holiday period. Auto-related stocks were among the biggest risers, with the real-estate and tech sectors also performing well.

Trading was thin, however, with US and UK markets closed for public holidays, while investors remained wary about recession risks and high inflation.

"A new year kicks off with continued focus on central banks and inflation, as well as on signals of how long and deep a recession are we heading into," Danske Bank said.

SPI Asset Management said the week's main event will be Friday's U.S. employment report.

"However, given the absence of Fedspeak since the December FOMC meeting, Wednesday's minutes from that meeting will also be a keen policy plot developer."

The pan-European Stoxx Europe 600 index closed up 1% at 428.95 on the first trading day of 2023.

Germany's DAX rose 1.1% while France's CAC-40 ended 1.9% higher. Auto stocks posted some of the strongest rises, boosted by China's reopening. Tech, retail and property stocks also gained.

North America

US markets were closed for the public holiday on Monday. Once Wall Street returns, there will be a handful of notable earnings releases and December jobs data to look forward to, including US jobs data on Friday.

US stocks inched lower in the final trading session of 2022, closing out a punishing year with further losses.

For the year, the S&P 500 posted a 19% decline, its biggest pullback since 2008. The Dow industrials dropped 8.8% and the Nasdaq slid 33%, stung by declines in technology shares.

Money managers entered 2022 expecting that advances in the stock market would slow after three consecutive years of blockbuster gains. But few were prepared for how tough the year would be.

Inflation remained stickier than many on Wall Street expected, forcing the Federal Reserve to kick off its most aggressive interest-rate increases in decades. Russia's war in Ukraine and the subsequent scrambling of energy markets caught traders off guard. And the specter of a global recession loomed.

With few places to hide, investors tossed out the strategies used since the financial crisis. Growth and momentum stocks - darlings of the Covid-19 pandemic - crumbled. Investors dashed for cash. The year's selloff across asset classes was particularly bruising for 60/40 investors, or those who put 60% of their money into stocks, and 40% into bonds.

"I've called it an anti-Goldilocks environment," said Hani Redha, global multi-asset portfolio manager at PineBridge Investments. "I think [2022] was probably up there in terms of being one of the most difficult years to get right for market participants."

Few investors expect market volatility to subside when the 2023 trading year kicks off this week. But some say they are hopeful the stock market could bottom sometime next year, kicking off a new rally.

"You still have high inflation which is moderating, you have a declining housing market, you have slowing growth - all that suggest a potential continued deterioration in the economy in the first part of 2023," said Peter Essele, head of portfolio management for Commonwealth Financial Network. But, he added, that slowdown may eventually prompt the Fed to begin signaling next year the possibility of interest-rate cuts.

"That could set up a very nice picture for the latter half of 2023," Mr. Essele said.

Fed Chairman Jerome Powell has said that the central bank isn't likely to consider lowering interest rates until officials are certain that inflation is slowing toward the Fed's goal of 2% sustained inflation.