Indices close out the year with gains

U.S.

The major indices hit all-time highs and closed out the year 2020 in the green. The Nasdaq Composite Index notched its best annual performance since 2009. Its gains were the strongest of the three major indices, ending the year with a jump more than 40%. The S&P 500 ended the year at an all-time closing high and making just over 16% gain for the year. The Dow also reached a record closing high, and ended the year with an increase of about 7%. Health care shares outperformed within the S&P 500 Index, and consumer discretionary shares were also strong. Energy stocks lagged, and the large technology sector was also weak.

Stocks began the week positively as President Donald Trump signed a USD 900 billion coronavirus relief bill on Sunday night. House Democrats, with a small amount of Republican support, also passed legislation on Monday evening to raise direct payments to USD 2,000, as President Trump had requested.

The rollout of new coronavirus vaccines also supported positive sentiment. On Wednesday, the UK became the first country to approve the use of the vaccine developed by AstraZeneca and Oxford University, and hopes grew that U.S. regulators would soon follow.

Regarding macroeconomic data, home prices rose at a faster pace than predicted in October, but November pending home sales unexpectedly fell 2.6%, reflecting constrained inventories. Weekly jobless claims fell to 787,000, the lowest level in almost a month.

EU

Shares in Europe rose, helped by the trade agreement between the UK and the European Union (EU) and the approval of a U.S. fiscal stimulus package. The UK’s FTSE 100 Index recorded modest losses, partly due to the stronger British pound, which reached USD 1.3675, its highest level in a year. UK stocks tend to fall when the pound rises because many companies that are part of the index are multinationals with overseas revenues. Germany´s DAX 30 closed the year with a realtively modest gain of 3,55%.

The UK government extended its strictest restrictions to additional areas, trying to curb a surge in infections and deaths caused by the coronavirus. Three-quarters of the country is now in a de facto lockdown. After regulatory approval, the authorities began deploying a second vaccine, one produced by AstraZeneca and Oxford University, enabling the government to accelerate its inoculation program. The EU also exercised its option to buy another 100 million doses of the vaccine.

Japan

Japanese stocks rallied in the holiday-shortened trading week. The Nikkei 225 Stock Average advanced 3.0% (788 points) and closed at 27,444.17, just off the 30-year closing high set on Tuesday. For the year, the benchmark gained 16.0%. In 2020, the TOPIX gained 4.8% and the TOPIX Small Index recorded a -2.2% return. The yen was modestly stronger versus the U.S. dollar and closed the year near JPY 103, about 5.0% stronger.

Government data showed that Japan’s industrial output growth was flat in November, well below economists’ 1.2% growth forecast. This reflects the weakness of the global economic recovery and a resurgence in the number of new coronavirus infections worldwide, which has reduced demand. October’s 4.0% growth rate marked five consecutive monthly gains, as demand for cars, manufactured goods, and machinery maintained a rising trend. However, the Ministry of Economy, Trade, and Industry’s latest survey showed that manufacturers expect a further output decline in December and a sharp 7.1% rebound in January. Separately, the government reported that Japan’s nationwide retail sales contracted in November, and consumer prices declined in Tokyo at their fastest pace in a decade.

China

Chinese stocks finished a holiday-shortened week at multiyear highs as investors anticipated stronger growth in 2021. The country’s benchmark SSEC Index rallied Friday to its highest close since February 5, 2018, while the blue chip CSI300 Index recorded its highest close since June 15, 2015, according to Reuters. For the year, the SSEC Index advanced 14% and the CSI300 Index rallied 27%.