Global stock markets edged lower on Monday, as elevated government bond yields continued to challenge equity valuations in the final days of a year that has proven positive for many regional markets. MSCI’s broadest index of world shares slipped 0.1%, though it remains up 17% for the year. Trading volumes were light ahead of the New Year holiday, with several major markets in Europe set to close early or remain shut on Tuesday.
European and Asian Markets Struggle
European markets opened in the red, with the pan-European index down 0.1% by mid-morning, driven lower by losses in the technology and industrial goods sectors. In Asia, South Korea’s main index, KS11, continued its struggle amidst ongoing political uncertainty, shedding 0.2% to end the year with a 9% loss.
China’s blue-chip CSI300 Index bucked the broader trend, gaining 0.5% to finish the year up 16%, with nearly all of those gains achieved in September following Beijing’s stimulus promises. Meanwhile, Japan’s Nikkei ended its last trading session of the year lower, retreating from a five-month high as investors took profits. The index, however, closed 2024 with a nearly 20% gain.
Hong Kong’s Hang Seng Index dipped 0.2%, while shares of South Korean budget airline Jeju Air plunged to a record low after a tragic plane crash claimed 179 lives.
US Markets Face Valuation Pressures
In the United States, futures for both the S&P 500 and Nasdaq were down 0.2%, reflecting continued caution after Friday’s selloff. The S&P 500 is up 25% for the year, while the Nasdaq has surged 31%, leaving both indices trading at stretched valuations amid rising Treasury yields.
Yields on 10-year Treasuries ended the year near eight-month highs at 4.597%, up 75 basis points from January, despite the Federal Reserve cutting cash rates by 100 basis points this year.
“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 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.”
Currency and Commodity Markets React
The US dollar remained strong, gaining 6.5% for the year against a basket of major currencies. The euro held steady on Monday at $1.0436 but has lost more than 5% against the dollar over the year.
In commodities, gold prices have soared 27% this year, closing at $2,612 an ounce, despite facing headwinds from a stronger dollar. Oil markets, however, have struggled due to concerns about weak Chinese demand and anticipated US supply increases in 2025. Brent crude fell 19 cents to $73.98 per barrel, while US crude dropped 26 cents to $70.34 per barrel.
As markets close out 2024, investors are bracing for potential volatility in 2025, driven by shifting monetary policies and the upcoming administration of President-elect Donald Trump. With a mix of executive orders and policy changes on the horizon, global markets remain poised for an eventful year ahead.
