NEW YORK: 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 US 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 shed 0.32pc, while the pan-European STOXX 600 index lost 0.76pc. 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, chief global market strategist 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 fell 149.96 points, or 0.52pc, to 28,495.3. The S&P 500 lost 15.7 points, or 0.48pc, to 3,224.32 and the Nasdaq Composite dropped 58.71 points, or 0.65pc, 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 0.07pc.

The Fed has aggressively increased the amount of dollars in circulation, pushing so-called M2 money supply growth to 7.6pc year-on-year last month from 3.2pc in November 2018, according to Dick Bove, senior research analyst at Odeon Capital Group.

The dollar index, which measures the currency against a basket of six major trading rivals, fell 0.29pc, with the euro up 0.35pc to $1.1214.

The Japanese yen strengthened 0.60pc versus the greenback at 108.84 per dollar.

Benchmark 10-year notes fell 16/32 in price to lift their yield to 1.9297pc.

Germany’s 10-year bond yield rose as high as -0.182pc on optimism over US-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.

Published in Dawn, December 31st, 2019