Australia

Australian shares have opened higher on Thursday following a volatile session on Wall Street. Uncertainty looms over whether central banks will be able to tame inflation while avoiding a global economic downturn.

The S&P/ASX200 paired early gains to sit 0.1% higher at lunch.

US stocks see-sawed through Wednesday amid the release of the minutes from the Federal Reserve's latest meeting and other key economic data, but finished the day in positive territory.

The S&P 500 closed almost 0.8% higher, while the technology-heavy Nasdaq Composite climbed 0.7% and the Dow Jones Industrial Index rose 0.4%.

All three opened in the green before briefly turning negative in midmorning trading after manufacturing activity dropped to its lowest level since May 2020. The Labor Department also said Wednesday morning that job openings topped estimates in November, a sign that demand for labor remained strong in the final months of 2022.

After spending most of the afternoon climbing, stocks pared gains once the Federal Reserve released minutes from its latest meeting - which indicated officials are committed to higher interest rates - but the indexes had gone up again by closing time.

In commodity markets, Brent crude oil fell 5.05% to $US77.95 a barrel while gold lost 0.67% to US$1,851.81.

In local bond markets, the yield on Australian 2 Year government bonds dropped to 3.37% while the 10 Year dipped to 3.90%. Overseas, the yield on 2 Year US Treasury notes climbed to 4.38% and the yield on 10 Year US Treasury notes rose to 3.70%.

The Australian dollar increased to 68.32 US cents from its previous close of 67.25. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, edged down to 97.07.

Asia

Chinese shares ended mixed, with the gains from property stocks and financials offsetting losses by chip makers and the energy sector. Although the market has rallied since November, DBS senior strategist Yeang Cheng Ling thinks new-economy stocks and domestic consumption will continue to benefit from the country's reopening and economic recovery in 2023. Private developer Seazen Holdings and state-owned Poly Developments & Holdings Group rose 10% and 3.9%, respectively, while China Shenhua was 1.0% lower and PetroChina Co. dropped 0.4%. The Shanghai Composite Index closed 0.2% higher at 3123.52 and the Shenzhen Composite Index edged up 0.1%. The ChiNext Price Index ended 0.9% lower.

Hong Kong stocks ended higher, building on the positive start to 2023. The benchmark Hang Seng Index jumped 3.2% to settle at 20793.11, its best closing level since July. Chinese property developers led gains, as investors looked forward to an expected industry recovery in the new year amid policy easing and a potential macroeconomic rebound. Longfor soared 12% and Country Garden advanced 7.4%. Internet giants further supported the market, with Alibaba surging 8.7% and Baidu advancing 8.2% amid rising hopes for a broad consumption spending bounce in China, which typically correlates with stronger earnings from tech companies.

Japanese stocks ended lower on the first trading day of 2023, dragged by falls in the shipping and healthcare sectors, as uncertainty continues over policy tightening by central banks. Nippon Yusen dropped 6.5%, medical equipment maker Sysmex lost 5.9% and Eisai shed 6.0%. Meanwhile, bank stocks ended higher on hopes for rising rates. The newest 20-year Japanese government bond yield rose to 1.340% for the first time since October 2014, while the 10-year yield rose 5 basis points to 0.460%. The Nikkei Stock Average fell 1.4% to close at 25716.86.

Europe

European stocks rose as investors took heart from upbeat inflation data from Germany. The pan-European Stoxx Europe 600 and the British FTSE 100 both gained more than 1%, the French CAC 40 advanced 0.4% and the German DAX climbed 0.8%.

German inflation fell more than expected last month, helped by government moves to ease pressure on consumers from high gas prices. "Lower oil and gasoline prices and the first phase of the government's gas-price cap have pushed down headline inflation in December," ING analysts said in a note. "Still, at current levels, inflation remains a major concern in 2023."

BNP Paribas' group chief economist William De Vijlder said in a blog post that the new year should see a change in key economic variables in Europe and the US, with inflation declining significantly, central-bank rates reaching their peak and economies sliding toward a recession.

"Initially, the Federal Reserve and the European Central Bank should continue hiking their policy rates, but subsequently their monetary stance should be sufficiently tight, allowing them to switch to a wait-and-see attitude," he wrote. Both the US and the eurozone should spend part of the year in a recession, which is expected to be short and shallow, but the contraction might be bigger if energy prices rise again or inflation falls less than expected, De Vijlder said.

North America

US stocks rose Wednesday, as traders weighed fresh economic data that fanned fears of a looming recession.

The S&P 500 rose 28.83 points, or 0.8%, to 3852.97 by the end of the trading day while the Dow Jones Industrial Average increased 133.40 points, or 0.4%, to 33269.77. The tech-focused Nasdaq Composite Index climbed 71.78 points, or 0.7%, to 10458.76.

All three opened in the green before briefly turning negative in midmorning trading after manufacturing activity dropped to its lowest level since May 2020. The Labor Department also said Wednesday morning that job openings topped estimates in November, a sign that demand for labor remained strong in the final months of 2022.

After spending most of the afternoon climbing, stocks pared gains once the Federal Reserve released minutes from its latest meeting - which indicated officials are committed to higher interest rates - but the indexes had climbed higher again by closing time.

Stocks are coming off a tumultuous year that saw the S&P 500 log its largest decline since 2008. Investor nervousness continued into the first trading session of 2023 on Tuesday, as popular stocks such as Apple and electric-car maker Tesla dropped. Both of those stocks were up Wednesday.

Investors remain on edge as policy makers balance inflation-fighting goals against recession risks. Traders expect central banks to continue lifting borrowing costs to contain inflation that appears to have peaked -- but that nonetheless remains well above targets.

Meanwhile, China's moves to ease strict Covid-19 rules could help cushion the global economy from a deeper slowdown, investors say, but it is unclear by how much.

"The equity rally is built on the idea that central banks can create something they've never done in the past: a soft landing," said Florian Ielpo, head of macro at Lombard Odier Investment Managers. "It still makes us worried that something could go wrong and that something could have a very detrimental impact on our portfolio. Cautiousness remains the key word going into this year."

Mr. Ielpo pointed to this week's slide in oil prices as a sign that investors remain concerned about the global growth outlook. Brent crude, the global benchmark, has fallen about 9% this week to $77.84 a barrel.

Meanwhile, global bonds continued to rally Wednesday, buoyed by fresh signs that inflation is easing in some large economies. France on Wednesday reported an unexpected decline in the annual pace of inflation in December, a day after Germany said consumer-price growth slowed last month.