LONDON/SYDNEY (Dec 30): World shares drifted lower on Monday as elevated government bond yields prompted investors to pull out of equities at the end of a year that has been positive for many regional markets.
MSCI's broadest index of world shares dipped 0.1%, but is still 17% higher for the year.
Trading volumes were thin ahead of the New Year holiday on Wednesday. Stock markets in Germany, Italy and Switzerland are shut on Tuesday as well, while those in the UK and France have a half-day trading session.
European stocks opened lower. The pan-European STOXX 600 index ticked down 0.1% by 1030 GMT, weighed down by the technology and industrial goods sectors.
This week China reports on the purchasing power of its manufacturing industry (PMI) on Tuesday, while the US activity data from the manufacturing industry in December is due on Friday.
South Korea's main index KS11 has suffered a storm of political uncertainty in recent weeks, and is saddled with losses of 9% for the year. It was last down 0.2%.
Shares of South Korean budget carrier Jeju Air hit their lowest level on record on Monday, in the wake of a plane crash that killed 179 people.
China's blue-chip CSI300 Index closed up roughly 0.5%, to be up almost 16% on the year with almost all that gain coming in just two weeks in September after Beijing promised more stimulus. Hong Kong's benchmark Hang Seng closed roughly 0.2%. lower.
Japan's Nikkei share average retreated on its last trading day in 2024, down from Friday's five-month high, as investors locked in profits on the index that rose nearly 20% for the year.
S&P 500 futures and Nasdaq futures were both lower by roughly 0.2% following Friday's selloff.
The S&P 500 is up 25% for the year and the Nasdaq up 31%, which is stretching valuations when compared to the risk-free return of Treasuries.
Yields on 10-year treasuries are near eight-month highs at 4.597% and ending the year around 75 basis points above where they started, even though the Fed delivered 100 basis points of cuts to cash rates.
"The continued rise in bond yields, driven by the reassessment of less restrictive monetary policy expectations, creates some concern," said Quasar Elizundia, a research strategist at broker Pepperstone.
"The possibility that the Fed may keep restrictive monetary policy for longer than expected could temper corporate earnings growth expectations for 2025, which could in turn influence investment decisions," said Elizundia.
Bond investors may also be wary of burgeoning supply as President-elect Donald Trump is promising tax cuts with few concrete proposals for restraining the budget deficit.
Trump is expected to release at least 25 executive orders when he takes office on Jan 20, covering a range of issues from immigration to energy and crypto policy.
"Changes to immigration, trade, and fiscal policy under the second Trump administration will likely be meaningful but stop short of some of the more dramatic proposals," said a Goldman Sachs note on Sunday night by David Mericle and Alec Phillips.
Widening interest rate differentials have kept the US dollar in demand, giving it gains of 6.5% for the year on a basket of major currencies.
The euro held steady on Monday but this year so far has lost more than 5% on the dollar to last stand at US$1.0436.
The dollar held near a five-month top on the yen at 157.79, with only the risk of Japanese intervention preventing another test of the 160.00 barrier.
The strength of the dollar has been something of a burden for gold prices, though the metal is still 27% higher for the year so far at US$2,612 an ounce.
Oil has had a tougher year as concerns about demand from China and a likely influx of supply from the US in 2025, kept a lid on prices and forced Opec+ to repeatedly extend a deal to limit supplies.
Brent fell 19 cents to US$73.98 a barrel, while US crude fell 26 cents to US$70.34 per barrel.
Uploaded by Magessan Varatharaja