Global stocks end 2019 near record highs, dollar slides

NEW YORK: The dollar slid to a six-month low on Tuesday as progress on U.S.-China trade tensions led investors to higher-risk assets, while a year-end rally that lifted global stocks to record highs stayed alive on the last trading day of 2019.

A gauge of world stock markets and stocks on Wall Street rebounded late in the session after trading lower most of the day, marking an end to a remarkable year for investors. Many equity indices, long-term bonds, oil and gold posted double-digit gains in 2019.

U.S. President Donald Trump said the Phase 1 trade pact with China would be signed on Jan. 15 at the White House, though confusion remains about details of the agreement.

Hope of an imminent deal has been a key driver for lifting global equities to their best year since 2009, up 24% for the year and 88% for the decade.

MSCI’s all-country world index .MIWD00000PUS of stock performance in 49 nations rose 0.86 point or 0.15 percent, to 565.24. The index is less than 3 points shy of an all-time high set on Friday, when the three major U.S. indices also posted record peaks.

The breakthrough in U.S.-China trade talks and a British election earlier in December pointing to a smoother exit from the European Union have boosted investor sentiment, but the outlook for equities next year is not as buoyant, said David Kelly, chief global strategist at JPMorgan Asset Management.

“This is a year in which everybody will celebrate,” he said.

Going forward, however, Kelly said it will be hard to achieve similar gains, with U.S. equities likely to advance by mid-single digits annually for several years. International markets, especially emerging markets, are poised to do better, he said.

“The U.S. stock market rally could continue but at some stage there’s going to be a significant correction, and the more it goes up, the more it’s going to correct,” he said.

In shortened trading sessions ahead of New Year’s Eve celebrations, the pan-European STOXX 600 index closed down 0.08%.

French .FCHI, British .FTSE and Spanish .IBEX listed stocks lost between 0.1% and 0.7%, while Frankfurt .GDAXI and Milan .FTMIB bourses were shut for the year-end holidays.

On Wall Street, the Dow Jones Industrial Average .DJI rose 76.3 points, or 0.27 percent, to 28,538.44 and the S&P 500 .SPX gained 9.49 points, or 0.29 percent, to 3,230.78 The Nasdaq Composite .IXIC added 26.61 points, or 0.3 percent, to 8,972.60.

Emerging market stocks lost 0.34%.

Bourses in Asia diverged. China mainland stocks .CSI300 .SSEC gained 0.4% after data showed manufacturing activity in the world’s second-largest economy expanded for a second straight month in December.

In Hong Kong, stocks .HSI fell 0.5% as protesters geared up for pro-democracy rallies on New Year’s Eve.

Markets in Japan and South Korea were closed for a holiday.

The dollar’s slide came close to wiping out the year’s gains, as the pound and trade-sensitive currencies rallied on improving U.S.-China trade relations and the outlook for global growth.

The decline of the dollar is one of the biggest bets in the FX market for 2020.

“We could be right at a turning point where global growth re-accelerates relative to U.S. growth, and that could mean a weaker dollar over time,” Kelly said.

The dollar was strong for much of 2019 thanks to the relative outperformance of the U.S. economy and investors’ preference for a safe-haven currency amid the trade dispute. But the dollar’s gains for the year shriveled in December. Investors bought up currencies linked to global trade, sending the Australian dollar, Chinese yuan and Scandinavian crowns to multi-month or multi-week highs against the greenback.

The dollar index .DXY, which tracks the greenback against a basket of six currencies, fell 0.237 point or 0.24 percent, to 96.503 and the euro EUR= was last up 0.14 percent, at $1.1213.