By Ankur Banerjee and Alun John
SINGAPORE/LONDON (Reuters) – Global stocks held firm on Tuesday in year-end trading that saw investors brace for Donald Trump’s impending administration by backtracking bets on a U.S. interest rate cut in 2025, helping the dollar to hold up against most. other currencies.
Volumes eased as the New Year holiday approached, and the Santa rally failed to materialize as higher Treasury yields weighed on higher valuations and boosted the greenback.
The MSCI global stock index was lower that day, but it was projected to close 2024 with an annual gain of 16%.
This year’s rally was the most eventful in the US, as it rose nearly 24 percent compared to the 8 percent gain of MSCI’s broad index of Asia-Pacific shares outside Japan, and only 5 percent in Europe. ()
But the situation was finally more cautious after the high yield of the US Treasury. The yield on the 10-year note reached 4.64% late last week, the highest since May.
This marks something that has changed since until the end of December, the benchmark US yield had spent the entire second half of 2024 below 4.5%.
This upward pressure, said Lee Hardman, senior financial analyst at MUFG, “reflects investors’ uneasiness about the potential impact on inflation from the Trump administration’s policy agenda.”
Investors expect President-elect Trump’s policies of looser regulation, tax cuts, tax hikes and stricter immigration to both growth and inflation, which will keep US yields high.
“The Fed has already shown more caution in cutting rates next year because of possible policy changes,” Hardman said.
But in a sign of year-end volatility, the 10-year yield sank three points on Tuesday, after a 7-bp drop on Monday, to trade at 4.52%. [US/]
Similarly, all three major US indices closed on Monday with heavy losses mainly due to the year-end tax standoff, valuation concerns and uncertainty about 2025. [.N]
CHINA
The only economic indicators to come out on Tuesday came from China, where data showed that manufacturing activity did not grow at all in December, although services and construction recovered, suggesting that policy stimulus is moving into other sectors, as the economy braces for new trade risks.
The National Bureau of Statistics Purchasing managers’ index fell to 50.1 in December from 50.3 last month, holding just above the 50-point-of-growth mark and missing the 50.3 median forecast in a Reuters poll.
China’s offshore chips shed 1.6%, while Hong Kong just held a good spot.
For all of 2024 the CSI 300 is up 14%, its first annual gain following a three-year decline. It gained 18% after four years of decline.
South Korea’s was Asia’s worst-performing stock market this year, down 10% as political turmoil weighed on investor sentiment.
Politics took a toll on Europe, with France’s main index down 2.8% in 2024, as lawmakers continue to wrangle the 2025 budget after inconclusive elections and the collapse of one cabinet under Michel Barnier.
In contrast, big jumps in a few Frankfurt-listed names, such as software company SAP, meant the German benchmark rose more than 18% on the year, despite the political vacuum there ahead of February’s election.
In financial markets, 2024 was all about the dollar, which gained against all other currencies in major developed markets, such as high US yields, and high-performance stock markets, which brought money to the US.
The U.S. currency, benchmarked against six others, fell 0.16% on Tuesday, but was held up for nearly two years through November. The index will increase by 6.5% this year.
In commodities, oil prices were poised for a second consecutive year of decline on concerns about demand in the world’s largest consumer. For the year, futures fell 3.4%, while US West Texas Intermediate crude fell 1%. [O/R]
Both had small gains on Tuesday.
But gold has had a banner year, rising more than 26% for the year, its strongest annual performance in more than a decade in search of a safe haven amid global political tensions and easing monetary policy. [GOL/]
(This story has been reposted to correct the year to 2024 in section 3)
