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How the markets ended 2021

Happy New Year message in letter tiles with oranges in each corner to decorate

The S&P/ASX 200 finished 68.8 points lower on the last trading day of 2021 or 0.9%, but was up 2.6% in December, rose 1.5% in the quarter and 13% higher for the year.

The Australian dollar fell 5.5% to $0.725 in 2021 due to diverging monetary policies, exacerbated by the emergence of the omicron variant, writes Trading Economics.

While the Reserve Bank of Australia was steadfast in its position to keep record low-interest rates in 2022, the US Federal Reserve has signalled three rate hikes next year.

The RBA has vowed not to tighten monetary settings until inflation is sustainably within its 2-3% target range. The RBA has its first board meeting in 2022 on February 1.

US MARKETS

US stocks finished their final trading session of the year lower, capping off a record-setting 2021 that came despite the persistent headwinds of Covid-19, writes CNBC.

The Dow Jones Industrial Average on Friday 31 December, 2021, fell 59.78 points, or 0.16%, to 36,338.30. The S&P 500 pulled back 0.26% to close at 4,766.18. The Nasdaq Composite dipped 0.61% to 15,644.97.

All three indexes finished the month higher. December marked the Dow’s fifth-straight monthly gain and the Nasdaq recorded a six-month winning streak.

The major averages posted double-digit returns this year, as the global economy began its recovery from the 2020 Covid lockdowns, while the Federal Reserve maintained supportive measures first implemented at the onset of the pandemic.

The S&P 500 rose 26.89% in 2021, marking the benchmark’s third straight positive year. The Dow and Nasdaq also notched three-year winning streaks, gaining 18.73% and 21.39% for the year, respectively, CNBC reports.

Tesla “is in a clear position of strength heading into 2022,” according to analysts at Wedbush, who see three catalysts, including China demand, driving the stock higher.

Barron’s reports that Wedbush has a current base price target on Tesla shares of $US1,400 and a bull case target of $US1,800. The Wedbush analysts, led by Dan Ives, wrote in a note they were maintaining their Outperform rating on the stock.

However, in the latest news from the company, Tesla has recalled nearly half a million of its vehicles after safety regulators expressed concern over possible defects that could increase the chances of road accidents.

According to Reuters, the recall applies to Model 3 cars made between 2017-2020, as well as Model S cars made in 2014 and after. The National Highway Traffic Safety Administration states the Model 3 recall stems from reported issues with the rear-view camera harness, which “may be damaged by the opening and closing of the trunk lid,” and thus preventing the camera image from properly displaying.

In the Model S, the NHTSA raised problems with the sedan’s front hood caused by faulty trunk latches. The agency writes the latch issues could cause the hood to open unexpectedly, and obstruct the driver’s view while traveling on the road.

EUROPE

European indexes fell on Friday, the last trading session of 2021, but logged gains of over 22% for the year.

The UK’s FTSE 100 fell 0.2% on Friday 31 December, 2021, and France’s CAC slipped 0.3%.

The FTSE and the DAX saw gains of around 15% for the year, while the French CAC logged a rise of nearly 30%.

The pan-European Euro Stoxx index rose 22.47% for the year with banks and tech stocks outperforming, both with rallies of 34%.

It is the benchmark’s best year since 2019 when the index gained 23.16%, and its second best year since 2009. The German DAX ended the year up 15.79% for its best year since 2019 when it gained 25.48%, and the third straight positive year and the ninth positive year in 10, according to CNBC.

BITCOIN

Bitcoin ended a banner year with a rocky finish, writes Bloomberg.

The largest cryptocurrency by market value closed out December with a 19% drop, its largest monthly loss since May. That was also its worst December since 2013. And its 60% advance in 2021 marked its smallest gain for an up year since 2015, when it climbed 36%.

Bitcoin hit a record high of almost $US69,000 in early November. But there are concerns over greater regulatory scrutiny around the world and the coin appears to be losing dominance to other offerings.

Among the biggest cryptocurrencies, Binance Coin posted the best return, adding roughly 1,300% in 2021.

Crypto giant Binance is bolstering its presence in France after a choppy year of regulatory scrutiny, according to CNBC.

The world’s largest cryptocurrency exchange is financing a 100 million euro ($113 million) initiative with industry group France FinTech in an effort to support the cryptocurrency and blockchain sector in France.

The initiative, announced in November and dubbed Objective Moon, will see Binance establish a research and development office in France and collaborate on an incubator program for start-ups and training programs. 

ASIA STOCKS

Traders looking for a turnaround in Asian stocks in 2022 will be keeping a watchful eye on Chinese stimulus, the direction of the dollar, fading retail participation and the outlook for equity listings, writes Bloomberg.

The case for a rebound should be aided by lower valuations after the MSCI Asia Pacific Index underperformed its global counterpart by around 20 percentage points last year. It declined some 4% with China’s regulatory crackdown and slower growth weighing on the index, but investors are hopeful that Beijing’s return to pro-growth policies and higher vaccination rates in the region will reverse the trend this year. 

COMMODITIES

West Texas Intermediate crude fell 1.9% on Friday 31 December 2021, to $US75.52 a barrel. WTI crude futures ended the year up 57% in 2021, the strongest annual performance since 2009 driven by the global economic recovery and supply-side issues.

Analysts attributed the market’s strength to pent-up demand, government stimulus and producer restraint, Trading Economics reports.

On the supply side, the OPEC+ resisted calls from major economies to increase oil production and is expected to stick to their existing policy of modest monthly output increases at its January 4 meeting, similar to its decision in the December 2 meeting.

Gold futures rose 0.9% on Friday to $US1,830.90 an ounce.

Gold closed out 2021 down 3.6%, one of its biggest annual losses since 2015. The drop came with a strong post-pandemic economic recovery and persistently high inflation, which prompted major central banks to tighten monetary settings earlier than anticipated, according to Trading Economics.

Gold has traditionally been considered as a hedge against inflation and uncertainties, with looming threats from surging Covid cases, but higher interest rates increase the bullion’s opportunity cost and reduce its appeal.


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