World stocks end 2019 at the best levels in a decade

London — World stocks flatlined near record highs on Tuesday and remained on track for their best year in a decade, as China’s latest policy easing pledges added to the optimism generated by signs of detente in the 17-month long China-US trade war.

Blue-chip shares in China rose 0.7% after premier Li Keqiang said the government was considering more measures to lower corporate financing costs and hinted at “targeted” cuts in banks’ reserve requirement ratio.

On Monday, Beijing also  announced plans to remove import tariffs on a range of goods in 2020.

However, lingering trade concerns and the recent run of gains kept most bourses under pressure, with Korean shares weakening 0.7%, pressured by Monday’s data that showed exports in the first 20 days of the month had fallen again.

MSCI’s index of Asia-Pacific shares excluding Japan was likewise flat while its all-country benchmark was unchanged, having added 3% in the month and 24% since the start of 2019.

A pan-European equity index also hovered near record highs though many continental markets are closed for Christmas and others saw thin trading volumes.

“It’s been a strong run up to Christmas for stock markets and it seems traders are taking a little breather in this shortened trading week,” said Craig Erlam, an analyst at online broker Oanda. “It’s been a good few weeks for investors, spurred primarily by the de-escalation in the trade war, with Trump only this weekend claiming it will be signed very shortly.”

He was referring to comments by US President Donald Trump on Saturday, which spurred Wall Street to new all-time highs on Monday. The S&P 500 hit its eighth straight intra-day record.

New York was also lifted by a 3% surge in Boeing which sacked CEO Dennis Muilenberg over the crisis surrounding its 737 MAX jetliner that followed two fatal crashes.

Equity futures hinted at a flat to firmer open for Wall Street.

Stellar year, but what next? 

World markets are heading into the end of a stellar year, with most major asset classes, from emerging-market bonds to US tech shares, enjoying robust returns.

But uncertainty remains on how long the trade truce will last as Trump kicks off his re-election campaign in January.

Worries have also resurfaced about how Britain will navigate the transition period for its exit from the EU. Those concerns pushed sterling to a near four-week low compared to the euro and a three-week trough against the dollar.

The pound was flat at $1.2927 compared to highs above $1.35 after the December 12 general election. Against the euro it was at 85.720p, coming off the December 13 highs of 82.780p.

“Risks to the outlook receded in 2019, which supported financial markets, but we cannot say the same thing about 2020,” said Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.

Eurozone bond markets were shut but 10-year US treasury yields slipped one basis point to 1.926% after Monday’s slight rise following lacklustre demand for two-year bills at auction. Another bond auction is due next Tuesday.

However, yields have risen more than 20 basis points off the 1.69% levels of early December, lifted by the equity rally and signs that the US Federal Reserve has paused its rate-cutting cycle.

In Japan, two-year bond yields hit 16-month highs after the message from the minutes of the Bank of Japan’s meeting prompted money markets to erase rate-cut expectations.

Brent oil futures ticked up 0.2% after Russia’s energy minister said co-operation with Opec to support prices would continue. US crude inventory data, due next Tuesday, is also forecast to show a second straight weekly decline.

Reuters