Stock markets close out record-breaking year with gains

Stock markets mostly rose Friday, the final trading day of a year which saw major indices hit record highs as inflation cooled.

Tokyo's benchmark Nikkei index surged more than 28 percent in 2023, its best performance for a decade.

In Europe, Frankfurt was on course to register a yearly gain of above 20 percent and Paris nearly 17 percent, having recently hit record heights.

London, however, stumbled in 2023, rising less than four percent.

Its FTSE 100 index, which shut early Friday, has "moved largely sideways for the year, thanks in large part to extreme uncertainty and the upwards march of interest rates" in the UK, noted Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.

"Questions now of course turn to next year's trajectory, and there's every chance (British) inflation is going to remain stubbornly above the Bank of England's target."

Analysts are expecting the BoE to begin cutting interest rates later in 2024 than in the United States and Europe, where inflation has cooled at a faster pace.

With US rate cuts seemingly not far away, the dollar was on course to record its weakest year since the onset of the Covid-19 pandemic at the start of the decade.

Meanwhile, Chinese stocks have been weighed down by concerns regarding the country's sluggish economic recovery from its long-lasting and strict pandemic lockdowns.

Still, there was positive news in the Chinese tech sector on Friday, with Huawei saying it expected 2023 revenue to grow by nine percent, despite facing continuing US sanctions.

In Japan, the Nikkei powered higher this year as "Warren Buffett's comments triggered a reappraisal of Japanese equities", said Masayuki Doshida, senior market analyst at Rakuten Securities.

Buffett told local media in April that he intended to buy additional Japanese stocks, with his Berkshire Hathaway then acquiring shares in five major Japanese trading firms.

"The Nikkei index regained its upward momentum on the back of expectations for structural reforms in domestic companies, a boost to the economy from inbound tourism and the outlook for continued monetary easing policy," Doshida added.

The Bank of Japan has avoided hiking interest rates despite high global inflation, in sharp contrast to other major central banks.

In the US, the Dow index on Thursday eked out a fresh record, while the S&P 500 fell a bit short of an all-time high despite finishing the day with modest gains.

US equities have trended higher since late October as the market has embraced moderating inflation and a strong labour market in the belief the US economy can avoid recession.

Data from the US Department of Labor on Thursday showed a slight increase in unemployment claims. The level remains low by historic standards, however.

Global oil prices rose Friday amid disruptions to Red Sea shipping.

Yet, "crude oil is set for its biggest yearly decline since 2020", said Swissquote Bank senior analyst Ipek Ozkardeskaya.

"OPEC's efforts to curb production and the rising geopolitical tensions in the Middle East remained surprisingly inefficient to boost appetite in oil this year."

The year also saw gold hit record heights, with the precious metal profiting from its status as a haven investment in times of economic and geopolitical unrest.