Stocks fall to the ceiling of a stellar year; Government bonds ended a volatile 2023 unchanged According to Reuters


© Reuters. A woman looks at an electronic board showing the Japanese stock price index at the Tokyo Stock Exchange in Tokyo February 6, 2013. REUTERS/Toru Hanai/Files

By Lawrence Delevingne and Alun John

(Reuters) – Global stocks headed lower on the final trading day of the year but were on course for their biggest annual gain since 2019, while U.S. Treasuries were set to finish the year roughly where they started after some wild moves in the benchmark 2023 index.

Stocks around the world surged in the final two months of the year as benchmark bond yields fell on expectations of a central bank rate cut in early 2023.

On Thursday, it closed just 0.3% off its all-time high set on January 3, 2022. On Friday, the S&P 500 lost 0.48%, fell 0.27% and fell 0.84%.

“With the New Year fast approaching and record high territory, investors have the champagne on ice until the holiday weekend,” Adam Turnquist, chief technical strategist at LPL Financial (NASDAQ: ) said in an email. “While extremely overbought conditions increase the likelihood of a temporary pause or pullback, longer-term returns have been positive and above average on a comparable period basis.”

The S&P 500 is up about 24% this year thanks to a massive rally in megacap tech stocks, while Europe, currently around a 23-month high, is on track for a nearly 13% annual gain and the MSCI world stock index is on track for a 20% gain. , the most in four years. All rose sharply in November and December.

“We have eaten a lot of the revenue that was expected in 2024. Of course, the positive momentum in the markets is associated with the decline in revenue, so the question now is how long can this trend continue?” said Samy Chaar, chief economist at Lombard Odier.

Chaar said future yields “are probably softer” than they were at the start of November, but if long-term US interest rates settle around 3.5% or 4%, there is “little danger of a big turnaround” and continued corporates. profits can add “a few percent up.”

The benchmark was 3.855%, up 0.5 basis points on the day and remarkably close to its year-to-date level.

That year-to-date performance masks some big swings, as the bond yield hit 5.021% in October, its highest since 2007, before retreating to fuel a rally in stocks.

Behind the decline in yields was a sustained drop in inflation worldwide, which has fueled expectations that central banks will cut interest rates early next year. The US economy continues to strongly fuel hopes of a “soft landing”.

Markets are counting on an 88% chance of the US central bank cutting interest rates in March, up from a 35% chance at the end of November, according to CME’s FedWatch tool. Traders are also pricing in more than 150 basis points of easing next year from the Fed, the European Central Bank and the Bank of England.

Spanish inflation was a rare piece of economic data in the quiet period between Christmas and New Year. The country’s 12-month inflation, harmonized by the European Union, was unchanged from November at 3.3%, though below the 3.4% expected by analysts polled by Reuters.

CHINESE UNDERPERFORMANCE

Chinese markets underperformed despite optimism at the start of the year when Beijing ended its zero-Covid policy.

Both Hong Kong and China’s onshore bluechip index have lost more than 10% for the year due to waning investor confidence in the world’s second-largest economy. (.SS)

Those losses compare to the Nasdaq, which has gained 44% in 2023, and the Japanese, which has gained 28%.

In the currency market, the dollar was little changed, heading for a 2% decline this year after two years of strong gains, with the declines reflecting falling U.S. yields.

Against a basket of currencies, the greenback was last at 101.22, avoiding a five-month low of 100.61 touched on Wednesday. (FRX/)

In commodities, wheat and corn futures in Chicago were set for their biggest annual decline in a decade as easing supply bottlenecks in the Black Sea region and higher output weighed on prices. (GRA/)

Oil prices were expected to fall 10% by the end of 2023 after a year of wild swings fueled by geopolitical concerns, production cuts and global measures to control inflation.

It rose 0.54% to $72.16 a barrel on Friday and was at $77.58, up 0.56% on the day. (STEED)

Gold prices rose slightly on Friday and were poised to end their best year since 2020. They added 0.1% to $2,066.79 an ounce. (GOAL/)