Global Markets Hold Steady Amid Cautious Year-End Trading
As the year draws to a close, global stocks are holding steady, with investors exercising caution in the face of uncertainty surrounding the incoming Trump administration. The MSCI world share index remained flat on Tuesday, but is poised to end the year with a 16% annual gain.
US Stocks Lead the Charge
The US has been the driving force behind this year’s rally, with the S&P 500 surging around 24%. In contrast, MSCI’s broadest index of Asia-Pacific shares outside Japan rose 8%, while Europe’s STOXX 600 gained a mere 5%. However, the mood has shifted in recent weeks, with higher US Treasury yields weighing on high equity valuations and boosting the dollar.
Treasury Yields Reach Highest Level Since May
The yield on the 10-year note reached 4.64% last week, its highest level since May. This marks a significant change, as the US benchmark yield had spent the second half of 2024 below 4.5%. According to Lee Hardman, senior currency analyst at MUFG, this upward pressure reflects investor unease over the potential inflationary impact of the Trump administration’s policy agenda.
China’s Manufacturing Activity Slows
In China, data showed manufacturing activity barely grew in December, although services and construction recovered. The National Bureau of Statistics purchasing managers’ index slowed to 50.1 in December, missing a median forecast of 50.3 in a Reuters poll. Onshore Chinese blue chips shed 1.6%, while Hong Kong just held in positive territory.
Currency Markets: The Dollar Reigns Supreme
The dollar has been the clear winner in 2024, gaining against all other major developed-market currencies. Higher US yields and outperforming stock markets have driven inflows to the US, with the dollar index on course to rise 6.5% this year.
Commodities: Oil Prices Poised for Second Straight Year of Decline
Oil prices are set to decline for the second consecutive year, driven by demand concerns in top consuming countries. In contrast, gold has had a banner year, surging over 26% on safe-haven demand amid geopolitical tensions and monetary policy easing.
Regional Markets: A Mixed Bag
South Korea’s KOSPI was the worst-performing stock market in Asia this year, with a decline of 10% due to political turmoil. In Europe, France’s main index fell 2.8% in 2024, while Germany’s benchmark rose over 18% on the year, driven by large jumps in Frankfurt-listed names such as software firm SAP.
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