The MSCI World index of stocks across the globe gained 0.21%

Global shares rose on Tuesday and global government bonds stabilised after the previous day’s selloff, which was triggered by a looming interest rate hike in Japan.

The MSCI World index of stocks across the globe gained 0.21%.

Investors are also gearing up for an expected interest rate cut by the U.S. central bank.

U.S. stocks closed higher after losing ground in the prior session. Technology and industrial shares drove the gains, while energy and materials led losses.

The Dow Jones Industrial Average gained 0.39%, the S&P 500 added 0.25% and the Nasdaq Composite advanced 0.59%.

The broad stock indexes in Europe closed marginally higher by 0.07% while Asia-ex Japan added 0.47%.

A simple way to think about this is from the lens of inflation, monetary policy and fundamentals, said Talley Leger, chief market strategist at The Wealth Consulting Group.

On the inflation side, I’m not so concerned because it’s below average back to the early 1900s and I think that in turn gives the Fed scope to keep cutting rates – which is the market expectation being priced in now. You can add to that strong fundamentals in the form of record holiday shopping and strong corporate earnings, Leger added.

Data on Monday supported expectations for a December rate cut by the U.S. central bank, with manufacturing contracting for a ninth consecutive month in November, although consumers beat analyst expectations with a $23.6 billion online shopping spree to start the holiday season.

Markets are pricing in an 87.2% probability of a 25 basis-point interest rate cut at the central bank’s meeting next week, shows the CME’s FedWatch tool.

There’s a little bit of momentum behind a cut but I think it’s what they say in the press conference about the neutral rate that a lot of people will be focused on, said James St Aubin, chief investment officer at Ocean Park Asset Management.

Jitters in the Japanese government bond market were soothed by a strong auction result, boosting the global mood. Bond yields move inversely to prices, and a weeks-long tumble in JGB prices on concerns about the nation’s finances and expected rate hikes by the Bank of Japan had sent Japan’s 10-year yields to a 17-year high and 30-year yields to an all-time high.

On Tuesday, global bonds again took their cue from JGBs, with the U.S. 10-year Treasury yield at 4.087% and the benchmark 10-year German yield at 2.752%, both down marginally on the day.