Global stocks close near record highs ahead of New Year, dollar and oil dip

After initially tumbling in December, world stocks recovered over the holiday period as investors became reassured economies could handle the surge in Omicron coronavirus cases, and are heading back toward record highs. — Reuters pic
After initially tumbling in December, world stocks recovered over the holiday period as investors became reassured economies could handle the surge in Omicron coronavirus cases, and are heading back toward record highs. — Reuters pic

WASHINGTON, Jan 1 — Equities around the globe traded little changed on Thursday as oil prices fell and the US dollar dipped against most major currencies although it has had its best year since 2015 with a 6.7 per cent rise.

With several markets in Asia and Europe closed yesterday, trading volumes were thin and most markets directionless.

The MSCI World Index shed 0.07 per cent. The index has surged 17 per cent in 2021, its third consecutive year of double-digit gains.

Analysts say the US economy has proven resilient in the face of pandemic-related challenges, and many expect the global economy will still expand at a well-above-trend pace.

After initially tumbling in December, world stocks recovered over the holiday period as investors became reassured economies could handle the surge in Omicron coronavirus cases, and are heading back toward record highs.

“As far as Covid is concerned, for now, market participants may stay willing to add to their risk exposures, and perhaps push equity indices to new highs, as several nations around the globe held off from imposing fresh lockdowns, despite record infections around the globe the last few days,” said Charalambos Pissouros, head of research at Cyprus-based brokerage JFD Group.

The dollar index fell 0.418 per cent yesterday.

On Wall Street, New Year’s Eve trading ended near record highs yesterday.

All three major US stock indexes scored monthly, quarterly and annual gains, notching their biggest three-year advance since 1999.

Investors have held onto expectations for resilience in the global recovery into 2022 and the prospect of further gains if money remains cheap and corporate profitability high.

This year’s “everything rally” has seen a wall of cheap central bank cash, government stimulus and strong economic rebounds out of the pandemic make it hard not to profit from soaring asset prices.

US stocks have powered the global rally as record-breaking earnings figures from Big Tech companies excited investors. This week the S&P 500 hit another record high.

Commodity prices have enjoyed a strong year too, with supply often falling short of a jump in demand as economies reopened.

On the last day of the year however, Brent crude futures settled down US$1.75 (RM7.31), or 2.2 per cent, at US$77.78 a barrel while US West Texas Intermediate (WTI) crude futures dropped US$1.78, or 2.31 per cent, to US$75.21 a barrel.

But both Brent and WTI are up more than 50 per cent in 2021, spurred by the global economic recovery and producer restraint.

Global oil prices are expected to rise further next year as jet fuel demand catches up.

China’s factory activity unexpectedly accelerated in December, but only by a slim margin, an official survey showed, with analysts foreseeing more economic headwinds in the near term.

Chinese shares, one of the few Asian markets open yesterday, closed higher , ending a tough year on a high. The blue-chip CSI300 index has lost 5.2 per cent this year, its worst annual performance in three years.

Lira backsliding

The euro, which has dropped 7.4 per cent this year as investors bet the European Central Bank would be slower to end pandemic-era stimulus than rival central banks, rose 0.1 per cent to hold above US$1.13 .

Japan’s yen, which has lost more than 11 per cent to the dollar in 2021, dipped to 115.1 yen per dollar, not far off four-year lows touched this month.

The pan-European STOXX 600 index lost 0.19 per cent.

The British pound remains down for the year against the dollar but looks set for its best year since 2014 versus the euro. Yesterday it rose to as high as 83.69 pence, its strongest since February 2020.

Elsewhere in currency markets, Turkey’s lira — by far the biggest currency loser in 2021 — fell for a fifth straight day.

This week’s falls have eroded the big gains the lira made a week earlier. Investors are concerned about the country’s unorthodox monetary policy and rising inflation, and fear President Tayyip Erdogan’s plan to defend lira deposits unveiled this month will not work.

Government bond markets were mostly closed.

Spot gold added 0.8 per cent to US$1,829.04 an ounce.

Bitcoin last fell 2.37 per cent. — Reuters