Gains in Europe and data from China helped equity markets shake off their New Year blues on Thursday as the latest signals from the US Federal Reserve nudged both the dollar and global bond yields lower.

Wall Street futures were tentatively pointing to the S&P 500’s first gain of the year while Europe’s STOXX 600 was battling to do the same after sagging to a three-week low in the previous session.

Energy was the day’s top sector gainer, up 1.5%, followed by a 0.9% rise in bank stocks, while British retailer Next was the best individual performer as a strong Christmas trading update lifted its shares over 4%.

There were lower PMI readings from most of the euro zone’s top economies but that was largely expected and both German and French inflation surveys showed prices moving up again, bolstering forecasts that euro zone-wide inflation rose back to 3% last month.

It was enough to reverse some of the early falls in the region’s bond yields and also stretched the euro’s lead for the day over the dollar to leave it buying $1.095 by the time US trading started.

MUFG analyst Lee Hardman said that if anything the PMI data had been a touch stronger than expected and that the Fed’s minutes on Wednesday had largely strengthened the view that its rates would start falling this year.

“I don’t think the pushback (on expectations of rate cuts) was as strong as some people were fearing. That has certainly contributed to the renewed weakness in the dollar,” Hardman said.

HCOB’s Composite Purchasing Managers’ Index (PMI), a survey-based gauge of the euro zone’s economic health, was revised up for December to match November’s 47.6 after an earlier estimate of 47. But that was still below the 50 mark separating growth from contraction.

The German 10-year yield, the benchmark for the euro zone, was last up 7 basis points (bps) at 2.096% having hit a 1-year low of 1.896% last week. France’s yield inched up too to 2.642%.

Benchmark US Treasury yields briefly climbed back above 4% on Wednesday but were back at 3.95% in Europe.

Asian shares managed to eke out a modest gain overnight, having dipped early on after Wall Street closed lower on Wednesday. However Japan’s Nikkei finished lower on its first trading day of the year.

Minutes of the Fed’s Dec. 12-13 meeting had shown a growing sense among policymakers that inflation was under control and raised concerns about the risks of “overly restrictive” monetary policy on the economy.

They suggested “many members endorsed the ‘higher rates for longer’ narrative, while those that projected rate cuts in 2024 viewed cuts coming later in the year,” said Qunicy Krosby, chief global strategist for LPL Financial.

Krosby said it underscored an “uncertain” path, suggesting expectations for a US rate cut as early as March may need to be adjusted.

Markets are now pricing in a 70% chance of the Fed cutting rates in March compared to 90% a week ago, according to the CME FedWatch tool.

Investors have also slightly lowered their expectations for the year, with futures pricing showing less than 150 bps of easing anticipated this year versus 160 bps last week.

Goldman Sachs analysts, though, still expect the first rate cut in March and five in total this year, calling the comments in the minutes dovish.

“We think it is already clear that inflation is moving down sustainably ... the comment implies that once this threshold is met, the policy rate should no longer be restrictive, not just that cuts should begin,” they said in a note to clients

The spotlight was on Thursday’s ADP National Employment Report and the U.S. nonfarm payrolls report scheduled for Friday to provide further clues on the labour market, which has shown signs of cooling.

U.S. job openings dropped by 62,000 to 8.79 million for the third straight month in November, the Labor Department said in its monthly Job Openings and Labor Turnover Survey on Wednesday.

A private sector survey showed on Thursday, meanwhile, that China’s services activity expanded in December at the fastest pace in five months thanks to a solid rise in new business, in contrast to an official survey that showed a sub-index of services activity shrank again at the end of 2023.

In the currency market, the dollar index was down 0.2% at 102.31, having touched a three-week high of 102.73 on Wednesday.

Morgan Stanley’s analysts told clients it had now moved to a “neutral” stance on the dollar after its bullishness of recent months.

Against the Japanese yen, though, the greenback rose to a two-week peak of 144.87 yen, having also jumped nearly 1% the previous day.

Oil rose more than 1% too, adding to gains on concerns over Middle Eastern supply following disruptions at an oilfield in Libya and heightened tensions regarding the Israel-Hamas war.

Protests forced a production shutdown at Libya’s Sharara oilfield on Wednesday, which can produce up to 300,000 barrels per day. The field, one of Libya’s largest, has been a frequent target for local and broader political protests.

Brent crude was last at $79.17 a barrel. U.S. West Texas Intermediate crude futures were up 1.3% at $73.63, while gold inched up to $2,043.09 an ounce after touching its lowest since Dec. 21 on Wednesday.

“At the moment, the oil price is not a significant economic issue but it will stay in focus,” UBS’s chief economist Paul Donovan said.

Agencies