World stock markets wobble as traders wind down for Christmas

World stocks stalled near record highs and currency markets were little changed on Monday as trading dwindled before the Christmas holiday and investors took profit on gains made this month.

European shares dipped slightly on Monday after nearing a record high in the previous session, as investors locked in some of the recent gains in thin trading ahead of the Christmas and Boxing Day holidays later in the week.

The pan-European STOXX 600 index was down 0.14 per cent by 0851 GMT, after nearing a record high in the previous session. MSCI’s broadest index of Asia-Pacific shares outside Japan was near its highest since June 2018, up 0.05 per cent.

The MSCI all-country stock index was flat, just below Friday’s record high. It has risen nearly 3 per cent this month as U.S.-China trade tensions eased and confidence grew that Britain would avoid a chaotic exit from the European Union. The index is up 23 per cent so far in 2019, set for its best year since 2009.

US President Donald Trump said on Saturday the United States and China would “very shortly” sign phase one a trade agreement. It calls for the United States to reduce some tariffs in exchange for China’s buying more American farm products. China said on Monday it would lower tariffs on products ranging from avocado to some types of semiconductors next year.

“The Phase 1 (P1) agreement and UK elections have cleared up tail risks, but the market is now transcending that euphoria,” said Stephen Innes, strategist at AxiTrader.

“While P1 is already reflected in stock prices, positioning is still relatively light, and with plenty of capital yet to be deployed, markets could even push significantly higher supported by the global growth rebound,” he added.

On Friday, the US benchmark S&P 500 extended its record highs to seven straight sessions, its longest streak in more than two years. All three major US indexes - the S&P 500, Nasdaq and Dow - gained.

Data on Friday showed US growth rose in the third quarter and the economy was probably maintained its expansion as the year ended. Consumer spending was stronger than previously reported, and there were upgrades to business spending.

During Asian hours on Monday, Japan’s Nikkei was little changed after reaching a 14-month top last week. It was up 2.3 per cent for the month.

Chinese stocks posted their worst single-day drop in six weeks, weighed down by a correction in tech shares after a state fund announced plans to cut its stakes in some chip makers.

The US personal consumption expenditure deflator for November, due on Friday, is the only major economic report this week.

In currency markets, the euro was at $1.1083, up 0.05 per cent after slipping 0.4 per cent last week. Sterling was at $1.3027, edging up 0.18 per cent from Friday’s three-week low of $1.2976. It slid 2.6 per cent last week for its worst weekly showing since October 2017. The safe-haven Japanese yen was down 0.08 per cent at 109.35.

That left the dollar index at 97.604, down 0.09 per cent against six major currencies.

In commodities, Brent crude was down 23 cents to $65.95 a barrel. West Texas Intermediate crude slipped 24 cents to $60.2 a barrel.

Spot gold was up 0.4 per cent at $1,484.07 an ounce.

The pan-European STOXX 600 index shed 0.1 per cent, with the banking sector among the biggest decliners. HSBC Holdings Plc fell 1.1 per cent, eyeing its worst session in nearly three weeks, as a report said the bank and JPMorgan had accessed the high-speed audio feed of central bank press conferences that could have potentially given them vital seconds of trading advantage.

An improving outlook on the global economy and optimism around a smoother Brexit had sent European equities to an all-time high last week, with the benchmark index logging its biggest weekly gain in two months.

Investors had more reason to cheer towards the end of the week, with the British parliament approving Prime Minister Boris Johnson’s Brexit deal and US President Donald Trump saying Washington and Beijing would sign an initial trade pact “very shortly”.

But with the trade deal unlikely to be signed this year, and Johnson’s willingness to take a hard line on future Brexit negotiations, analysts said stocks had little reason to move much from current levels.

“Things have had a good run recently and we’re now just seeing low volumes, low volatility and a small little profit taking,” said David Madden, analyst at CMC Markets.

Reuters