World Stocks Hold Steady in Cautious Year-End Trading
World stocks remained steady on Tuesday as investors approached the end of the year with caution, weighing potential changes in the US interest rate environment and the incoming Donald Trump administration. The dollar held strong against most other currencies, with some traders scaling back bets on significant US interest rate cuts in 2025.
The MSCI world share index was flat on the day, but on track to end the year with a 16% gain, led by a strong US market. European shares were up 5%, while the broader index of Asia-Pacific shares outside Japan rose 8%.
However, market sentiment has become more cautious in recent weeks due to rising US Treasury yields, with the 10-year note reaching 4.64% late last week, its highest level since May. This has led some investors to reassess their expectations around rate cuts and inflation.
President-elect Trump’s policies on loose regulation, tax cuts, tariff hikes, and tighter immigration are expected to be pro-growth and inflationary, potentially keeping US yields high. The Fed has already shown more caution over cutting rates further in 2025.
In Asia, manufacturing activity barely grew in December, according to data released Tuesday, although services and construction recovered, suggesting policy stimulus is trickling into some sectors. The Chinese stock market, the CSI 300, rose 14% in 2024, its first annual gain after three years of decline. The Korean stock market, however, was the worst-performing in Asia, down 10% due to political turmoil.
In currencies, the dollar has been the only major currency to gain ground in 2024, rising against all other major developed-market currencies as US yields and outperforming stock markets drew in investors. Oil prices are poised for a second straight year of decline amid demand concerns in top consuming countries, while gold has gained over 26% in the year, its strongest annual performance in over a decade.