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Dec 31, 2018

Markets limp to end of dismal 2018 after worst year in a decade - business live

Graeme Wearden


What a difference a year makes!
On the last trading day of 2017, City traders were celebrating the news that the FTSE 100 had hit a new all-time high.
As we blogged at the time, the blue-chip index gained over 7% during the year to finish at 7,687 points. That’s more than 12% higher than today’s levels.
Other countries did even better, helping to drive globe stocks up by a sizzling $9 trillion during the year.

Guardian markets liveblog, 29 December 2017

Last year’s end-of-year liveblog was more Photograph: Guardian

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Analysts at Mizuho Bank have cautioned against getting carried away by Donald Trump’s claim that he’s held “very good” talks with Chinese president Xi Jinping.
They told clients:Whilst President Trump has lauded ‘big progress’ in trade talks with China following a phone call with Xi during the weekend, it remains to be seen how much this can boost investor confidence given that market reaction on recent positive development has largely been muted.

Peter Tuchman on the floor of the New York Stock Exchange Photograph: Joshua Bright/Joshua Bright for The Guardian
We’ve seen plenty of dramatic scenes at the world’s stock exchanges this year, with traders wallowing in gloom as shares crash, or beaming with delight as shares recovered.
That’s delivered a bumper crop of photos from the trading floors, and no-one sums up the mood better than veteran trader Peter Tuchman - who has a real knack for capturing the state of play.
My colleague Dominic Rushe caught up with Tuchman, and reports:Like most celebrities in real life, Tuchman is smaller than he looks. Twin clouds of white hair, echoed by snowy facial fuzz, frame a bald pate that slopes gently down to expressive eyes on a face that seems perpetually in motion, as are his hands and feet. Tuchman is a human emoji, a one-man metaphor for the mood of the market. But don’t be fooled by the clowning – Tuchman is a cool cat. What you are seeing is not necessarily what he is thinking.
Tuchman, 60, came late to fame. The born-and-bred New Yorker had already been working on the floor of the NYSE for some 20 years when he first made the front pages. It was 2007 and the financial crisis was dominating the news cycle. On another day of wild swings Tuchman, snapped mouth agog, appeared on the front of the New York Post. “I had just received the bill for my son’s barmitzvah and it was way more money than I anticipated,” jokes Tuchman.
But Tuchman’s jollity has a serious side too:His sangfroid, Tuchman says, comes from his parents. Marcel and Shoshana Tuchman were Holocaust survivors who were imprisoned in Auschwitz and Bergen-Belsen. “My father was a slave laborer for Siemens Corporation, which is still a public company here,” he says, nodding ruefully at the trading floor.
His grandmother was murdered in front of his father, most of whose family were also murdered by the Nazis. “As was my mother’s,” he says. “My father went up against Josef Mengele, the death doctor [who performed deadly experiments on Auschwitz prisoners], as did my mother. My mother’s whole family was gassed. They could have come out of that, you know, being angry and depressed, negative-minded people; they didn’t. There are two options in this thing. You can come out of challenges trying to devour every day and looking at life as if the cup is half-full or you come from a negative point of view that you’re a victim and the cup is half-empty. I vote for the former.”
Marcel Tuchman, who worked until he was 93 teaching medicine, died earlier this month aged 97. His son was back at work the next day. “My father always said: ‘When I die, cry and go to work.’ That was his advice.”
Here’s the full piece:

Fiona Cincotta of City Index points out that UK-focused companies are having a decent morning (after a pretty ropey year).The FTSE opened the last trading day of the year a touch higher with a mixture of consumer, property and mining companies making moderate gains.
With the pound firmer against the euro and the dollar, FTSE gainers were mostly companies with a strong domestic focus except for miners which were helped by stronger copper and oil prices.

Keith McCullough (@KeithMcCullough)
LONDON: open for its final trading day of what's been a bad year with the FTSE limping +0.18%
December 31, 2018
Updated

Unless Wall Street manages the mother of all rallies today, it will suffer its worst December since the Great Depression.

jeroen blokland (@jsblokland)
Strange things would have to happen today to not make this the worst December month for the S&P 500 Index since 1931! pic.twitter.com/7UYL65b7lw
December 31, 2018

With less than two hours trading to go in London, the FTSE 100 is up 17 points at 6751.
That’s 12% lower than this time last year....

Holger Schmieding of German bank Berenberg suggests there are four “extraordinary political mistakes” which might trigger fresh market mayhem in 2019.
They are:
  • for Italy’s radical government to plunge their country into a genuine Greek-style debt crisis;
  • for Britain’s mostly pro-EU political class to simply let the train roll towards and then over the hard Brexit cliff instead of using the ten weeks between the likely death of May’s Brexit deal and Brexit day on 29 March 2019 to stop it through a softer Brexit option or a new vote to stay in the EU;
  • for Donald Trump to hurt the US economy and impair his chances of re-election in late 2020 by going too far in his costly trade wars in 2019;
  • for China to let a hard landing happen instead of using its ample policy toolbox to smooth the inevitable slowdown in cyclical momentum and trend growth.
Now the good news. He doesn’t think they’re particularly likely...For example, Italy’s budget passed last night, showing that the EU and markets have imposed some rudimentary discipline on Rome.
Separately, Trump’s latest musings on progress in talks with China support hopes that both sides will try to strike some deal in coming months even if some of the thorny issues between the geostrategic rivals will probably not be fully resolved for many years.
So, Schmieding suspects that markets may pick up during 2019:Chances are that, after a rocky start to the New Year, a less negative narrative can unfold later in 2019. That we have finally put an unexpectedly difficult 2018 behind us need not remain the only reason to celebrate the advent of a New Year tonight.

An electronic board showing the Hong Kong share index outside a bank in Hong Kong today Photograph: Kin Cheung/AP

Hong Kong’s stock exchange managed a last-minute rally today.
The Hang Seng jumped by 1.3%, lifted by Donald Trump’s latest optimistic tweet about the trade negotiations with China.
But that still leaves the index down 13.6% for 2018, its worst year since 2011.
Updated

Commodities suffer first annual losses since 2015


The Starla, an Iranian large crude oil tanker.

Photograph: YONHAP/EPA
The last 12 months have proved difficult for investors in stock markets around the world as fears over global growth mount up, and for many owners of commodities 2018 has proven equally tricky, my colleague Jasper Jolly writes:
Prices for oil and gold, two of the most traded commodities, are both set to fall for the first calendar year since 2015.
Futures for Brent crude oil, the North Sea benchmark, gained a dollar in value today, but that has not been enough to recover losses for 2018, which currently stand at around 18%. Fears of a supply glut amid weakening growth in China and other major economies depressed prices to just over $54 per barrel. Losses for West Texas Intermediate, the American benchmark, have been steeper, at 23%.
Gold is seen as the financial safe haven par excellence, but it is on course to suffer its first annual decline in three years. Gold futures prices slumped from above $1,350 per troy ounce in the spring to below $1,200 in the late summer. They have since recovered for a 2% fall during 2018 – stronger than the performance of silver, prices of which have fallen by 9%.
Cocoa was the top gainer among major traded commodities in 2018, leading a field of strong performances from a select group of agricultural commodities. Cocoa futures prices have gained more than 27%.
Speculators looking further afield at cryptocurrencies – which share some characteristics with commodities – would not have been rewarded. Those who had bought bitcoin at the end of 2017, near the height of the cryptocurrency mania, would have lost almost three-quarters of their money.
Updated

Naeem Aslam of Think Markets blames monetary policy tightening by the world’s central banks for this year’s losses.The Fed stopped printing easy money a few years back and increased the interest rates four times this year. The European Central Bank also ended up its quantitative easing program and there has been several discussion on the topic of the ECB normalising the interest rates.
All in all, almost all the European indices are down more than 10 percent over this year and some of them are down over 15% (DAX) for this year. The Euro Stoxx 500 index is down by 13% this year—the biggest loss since 2008. The fact is that things aren’t looking really any brighter in 2019 as well because there are plenty of risk events which are going to keep investors on their toes.
For instance, at the beginning of the year, the first thing which investors will have to deal with is the Brexit chaos the UK leaving the European union. Then we have the US trade war with China and the ongoing struggle about securing the funds to build the wall.

Donald Trump’s claim that he’s making ‘big progress’ in the trade negotiations with China may be giving world markets a small boost today.
Wall Street is expected to open higher in a few hours time, following the news that presidents Trump and Xi spoke over the weekend.

Holger Zschaepitz (@Schuldensuehner)
Global stock mkt pin hopes on Sino-US talk as year end deep in red. Asia, Europe, US Futures gain amid optimism around trade talks between 2 of world’s largest econs. Almost all Asian indices in red in 2018 w/ India a rare gainer. Bonds finishing strongly as mkts bet Fed is done. pic.twitter.com/gJms1AVzuS
December 31, 2018

European stock markets have started trading, but there’s little drama yet.
In London the FTSE 100 index has gained 10 points, led by online supermarket Ocado (+2.1%), budget airline easyJet (1.7%) and web estate agent RightMove (1.5%).
The French CAC has gained 0.5%, with Spain’s IBEC up 0.4% and the Netherland’s AEX up 0.3%.
So with trading thin, and little news about, European stocks seem certain to suffer their worst year since 2008, as this chart shows.

European stocks over the last decade

European stocks over the last decade Photograph: Bloomberg TV

Australia’s stock exchange has closed for the year, after yet another day of losses.
The S&P/ASX200 index dipped by 0.14%, taking its combined losses in 2018 to over 9% - the worst year since 2011.

Photograph: Tyrone Siu/Reuters
In a worrying signal for 2019, China’s manufacturing sector is now contracting.
The official factory Purchasing Managers’ Index (PMI) fell to 49.4 in December, official data shows, a two-year low.
That’s below the 50-point mark that shows if activity rose or fell.
Manufacturers were hit by falling orders, with new export orders dropping for the seventh month in a row. That suggests the tariffs imposed on Chinese goods at the US border are hitting demand.
Mike Van Dulken of City firm Accendo Markets says this data “may fan the flames of concern about slowing global growth”. More here.

The worst-performing market this year? China.


A investor monitors stock prices at a securities company in Hangzhou in China’s eastern Zhejiang province.

Photograph: STR/AFP/Getty Images
China’s stock markets have suffered a particularly bleak 2018.
The Shanghai composite index has crashed by 25% this year, leaving investors suffering very heavy losses.
The trade war with the US has acted like a lead weight on many stocks, of course, but there’s also concern that China’s economy is weakening.
My colleague Lily Kuo explains:“People have started to reduce or even stop spending money because they don’t expect the economy will perform well,” said Ye Tan, an independent economist based in Shanghai. “Companies and individuals are wary about the economy.”
Going into 2019, China faces not just a slowing economy but also a protracted trade war with the US, a pile of debt that threatens the world economy along with the Chinese financial system, and a populace demanding better environmental, labour, and health protections.
Shanghai is closed today, as China prepares for the New Year celebrations. Investors deserve the break.

Introduction: 2018 and all that selling


An index chart on an electronic board at the Sao Paulo Stock Exchange (B3), in Sao Paulo, Brazil.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
It’s the final day of the year, and many investors will forgiven for wishing ‘goodbye and good riddance’ to 2018.
The last 12 months have been pretty tough in the markets. Global stocks have suffered their worst losses since the financial crisis of 2008, wiping around 11% off the MSCI All Country World Index of stocks.

MSCI’s all-country equity index

MSCI’s all-country equity index Photograph: Thomson Reuters
In London, the FTSE 100 is limping towards the end of a rough year. The blue-chip index has shed 12% of its value since the start of January, hitting a series of two-year lows -- in a blow to pension funds and savers big and small.
The big worry is that the long bull market, which reared up after the great recession ended in 2009, is now over.
Anxiety over trade wars, a slowing global economy, Donald Trump’s increasingly erratic behaviour and US interest rate hikes have all hurt stocks this year.
In Europe, the tortuous Brexit negotiations and the long-running row between Italy’s populist government and Brussels have also worried investors.
Trevor Greetham of Royal London Asset Management explains:We were surprised at the ferocity of the selloff in December which we put down to rising nervousness about the US-China trade dispute, an ill-judged and poorly communicated rate hike from the US Federal Reserve and an increasingly erratic pattern of behaviour from President Trump as the Mueller investigation into Russian collusion enters its final stages.
“The last couple of weeks have seen a surprise unilateral decision to pull all US troops out of Syria, threats of a “very long” government shutdown if Congress refuses to fund the Mexican border wall and a counterproductive attempt to blame the Fed for market weakness when it’s the trade war that investors are most worried about.
“Elsewhere in the world Theresa May’s chaotic postponement of the meaningful vote on the EU Withdrawal Bill has added to the jittery mood in markets, raising as it does the risk of a No Deal Brexit that would damage both the UK and euro area economies.
But perhaps investors are too gloomy.
Over the weekend, Donald Trump and Xi Jinping both made positive noises about a breakthrough in their trade talks, offering hope that deeper tariffs can be avoided.

Donald J. Trump (@realDonaldTrump)
Just had a long and very good call with President Xi of China. Deal is moving along very well. If made, it will be very comprehensive, covering all subjects, areas and points of dispute. Big progress being made!
December 29, 2018
That is likely to give traders some much-needed optimism today. European markets are expected to open higher today, in a shortened trading session (although Germany and Italy will be closed).

Mike van Dulken (@Accendo_Mike)
#FTSE100 Index called to open +20pts at 6755 pic.twitter.com/Va9dkaekio
December 31, 2018

Updated

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