Credit: REUTERS/BRYAN R SMITHBy Herbert Lash
NEW YORK, Dec 30 (Reuters) - The dollar slid on Monday on a loss of safe-haven appeal, and global stock markets fell as a year-end rally lost steam after pushing stocks to record highs in 2019.
As investors assessed the outlook for next year, thin year-end trading volumes exacerbated broad weakness in the dollar, which has fallen the past three sessions. On Friday, it notched its biggest daily decline since March.
Germany's 10-year bond yield hit a seven-month high and U.S. Treasury yields rose, driving the yield curve between two- and 10-year notes to its steepest in 14 months on expectations the Federal Reserve will not lower rates.
Wall Street slid as did equity markets in Europe and Japan, but Chinese blue chips closed at an eight-month high and shares in Hong Kong closed at more than a five-month peak after China's central bank moved to lower funding costs.
MSCI's gauge of stocks across the globe .MIWD00000PUS shed 0.32%, while the pan-European STOXX 600 index .STOXX lost 0.76%. Both hit all-time highs on Friday.
Stocks on Wall Street slid after a record run. The benchmark S&P 500 has logged record closes in nine of the past 11 sessions and is up for four months in a row.
"This is just end-of-year rally fatigue," said Kristina Hooper, chiefglobal marketstrategist at Invesco in New York. "It makes sense that investors are taking their foot off the gas for the last two days of the year."
The Dow Jones Industrial Average .DJI fell 149.96 points, or 0.52%, to 28,495.3. The S&P 500 .SPX lost 15.7 points, or 0.48%, to 3,224.32 and the Nasdaq Composite .IXIC dropped 58.71 points, or 0.65%, to 8,947.91.
Monetary policy, including three rate cuts by the Fed, was the dominant factor for markets in 2019 and will likely be next year, too, as central banks remain accommodative, Hooper said.
"That certainly helped markets," she said, but more for emerging markets than in developed markets.
Emerging market stocks rose 0.07%.
The Fed has aggressively increased the amount of dollars in circulation, pushing so-called M2 money supply growth to 7.6% year over year last month from 3.2% in November 2018, according to Dick Bove, senior research analyst at Odeon Capital Group.
The dollar index .DXY, which measures the currency against a basket of six major trading rivals, fell 0.29%, with the euro EUR= up 0.35% to $1.1214.
The Japanese yen JPY= strengthened 0.60% versus the greenback at 108.84 per dollar.
Benchmark 10-year notes US10YT=RR fell 16/32 in price to lift their yield to 1.9297%.
Germany's 10-year bond yield rose as high as -0.182% DE10YT=RR on optimism over U.S.-China trade and the global growth outlook, which was tainted for much of 2019 by fears the trade war would push the world into recession.
Gold prices gained, helped by hedging against a potential spike in inflation next year or potential geopolitical risk, Hooper said.
Spot gold XAU= added 0.3% to $1,515.31 an ounce.
Oil prices rose to three-month highs, boosted by trade hopes and upbeat industrial data, while traders kept a close watch on the Middle East following U.S. air strikes in Iraq and Syria.
Brent crude futures LCOc1 gained 55 cents to $68.71 a barrel by 11:17 a.m. EST (1617 GMT). West Texas Intermediate (WTI) crude futures CLc1 fell 24 cents to $61.48 a barrel.
Chinese Vice Premier Liu He will visit Washington this week to sign a Phase 1 trade deal with the United States, the South China Morning Post reported.
A stellar 2019 for government bond marketshttps://tmsnrt.rs/2PMkPA5
(Reporting by Herbert Lash; Editing by David Gregorio)
((herb.lash@thomsonreuters.com; 1-646-223-6019; Reuters Messaging: herb.lash.reuters.com@reuters.net))
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