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World stocks hit their highest levels since late 2022

World stocks

MSCI’s world stock index hit an over one-year high and is 4.5% higher in December

World stocks rallied to their highest levels since late 2022 on Wednesday, with year-end optimism high on hopes that major central banks will start cutting interest rates early next year.

U.S. stock futures were flat a day after the S&P 500 hit its highest intraday level since January 2022. European shares were a bit higher, with trade generally subdued given public holidays across the region on Monday and Tuesday.

China’s November industrial profits posted double-digit gains as overall manufacturing improved, data showed, although soft demand continued to constrain business growth expectations, strengthening calls for more macro policy support.

MSCI’s world stock index hit an over one-year high and is 4.5% higher in December, while MSCI’s broadest index of Asia-Pacific shares outside Japan added over 1% to a more than four-month high.

We still have strong equity markets and that is likely to hold through to New Year, said SEB chief economist Jens Magnusson.

A risk-on mood in world markets lifted the euro to over four-month highs against the dollar, while oil prices slid as some major shippers returned to the Red Sea – an area disrupted after attacks on vessels earlier this month.

Maersk shares dropped more than 4.5%, and other shipping stocks dropped, giving back part of this month’s gains fuelled by expectations that a Red Sea traffic halt could raise rates.

Japan’s Nikkei rallied over 1%, and Hong Kong’s Hang Seng Index gained 1.7% in its first trading day after the Christmas and Boxing Day holidays. Chinese blue chips eked out a marginal gain of 0.35%.

Market pricing now shows a more than 80% chance the Federal Reserve is likely to begin cutting rates next March, as per the CME FedWatch tool, with more than 150 bps of easing priced in for all of 2024.

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