LONDON/SINGAPORE, Dec 30 (Reuters) – Global stocks held steady on the final trading day of the year as markets weighed on U.S. data and the cancellation of China’s anti-COVID-19 policy. , but the global index is down 20% on the. a year ravaged by high inflation and war in Europe.
The dollar, benefiting from rising US interest rates, was on track for its best annual performance in seven years.
The Federal Reserve and other central banks are battling inflation in the face of supply chain disruptions and energy crises caused by the COVID-19 pandemic and oil producers attacked by Russia in Ukraine.
“This is the equity market that the Fed has driven all year,” said David Bizer, managing partner at investment manager Global Customized Wealth.
“The market is trying to wait and see when the Fed is going to hike, how fast and how far.”
US stocks (.DJI)(.SPX)(.IXIC) closed 1-2.5% higher on Thursday, supported by data showing a rise in jobless claims and the US, suggesting Fed hikes are starting to cool demand for jobs.
Markets expect the Fed funds rate to be around 5% in the middle of next year, from the current 4.25-4.5%.
The Fed has raised rates by 425 basis points since March.
The quarter and end of the square-books have raised the stakes, according to Bizer.
But S&P 500 futures lost a little ice on Friday, falling 0.5%.
The Dow Jones index is down about 8.5% on the year, while the S&P 500 is looking at 19%.
European stocks (.STOXX) were down 0.5% and on track for a 12% decline for the year. Britain’s FTSE 100 (.FTSE), which covers many traders, fell 0.2% but was bound to rise more than 1% in 2022.
MSCI’s world equity index (.MIWD00000PUS) is headed for its biggest annual decline since the 2008 global financial crisis, down more than 40%.
MSCI’s broad index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.38%, but is set to end the year down 19%, its worst performance since 2008.
Japan’s Nikkei (.N225) was unchanged on the day, down 11% on the year.
China’s blue-chip CSI 300 Index (.CSI300) rose 0.4% on the day but was down 22% on the year, while Hong Kong’s Hang Seng Index (.HSI) rose 0.2% a day but down 16% by 2022.
China’s leaders have promised to adjust policies to reduce the impact on businesses and consumers from the rise in COVID-19 infections.
China’s health system has been reeling from a surge in cases since the country began scrapping its “zero-COVID” policy at the beginning of the month, with many countries reporting that or plans to raise barriers to immigration from China.
The dollar index, which measures the greenback against six major currencies, fell 0.16%.
The dollar has gained more than 8% on the year, but lost more than 7% this quarter on expectations that the Fed may not raise rates as previously feared.
Sterling was set for its worst performance against the dollar since 2016, when Britain voted to leave the European Union. It was last at $1.2063, down 0.09% on the day and nearly 11% on the year.
The Japanese yen strengthened to a 10-day high of 131.72 per dollar, but the Bank of Japan’s ultra-dovish policy has pushed it down 13% this year, its worst performance since 2013.
The euro was steady at $1.0669, and is looking at a 6% fall on the year.
Investors are worried that central banks are taking too much action to discourage inflation and slow the economy.
“Stopping the recession is a tall order,” said Vishnu Varathan, chief economist and strategist at Mizuho Bank, noting that the risks to emerging economies are strong and intact. from international policies.
Going into 2023, inflation will continue to be hit, and investors will be wary of geo-political tensions arising from the conflict in Ukraine and diplomatic tensions over Taiwan, analysts said.
US Treasuries and German bonds, benchmarks of global debt markets, have lost 16% and 24% in dollar terms this year.
Ten-year US Treasury yields gained 1 basis point to 3.84% on Friday, while the 10-year German Bund rose 3.5 bps to 2.5%.
U.S. crude rose 0.54% to $78.72 a barrel, while Brent was at $83.87, up 0.49% on the day.
Brent looked to end the year with an increase of 8%, after jumping 50.2% in 2021. US crude is on track for a 4.8% increase in 2022 after inflation 55% last year.
Gold held steady at $1.816 per ounce, little changed on the year.
Editing by Simon Cameron-Moore, Sam Holmes, Philippa Fletcher
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