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Markets stagger towards end of worst year since financial crisis

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Global stock markets fell double digits over entire year due to trade war, Brexit

NEW YORK: World stock markets staggered on Monday towards the end of their worst year since the global financial crisis a decade ago, rocked by rising interest rates, the global trade war and Brexit, dealers said.

London and Paris wobbled in holiday-shortened trade on New Year's Eve - but nursed double-digit annual falls after an exceptionally volatile 2018.

Hong Kong rose on Monday after US President Donald Trump hailed "big progress" on resolving Washington's trade war with Beijing, but was down almost 14 per cent over the year.

Wall Street gained in the final trading session of 2018, but major indices declined for the year, with the Dow shedding 5.6 per cent compared to the end of 2017.

Equities have been hammered in 2018 by tighter monetary policy - from the US Federal Reserve and also the European Central Bank, which halted its quantitative easing stimulus policy this month.

"Global stocks are set for their worst year since the financial crisis, thanks to the tightening monetary policies," said ThinkMarkets analyst Naeem Aslam.

The Bank of England meanwhile hiked British interest rates in August for the second time since the financial crisis to help tame inflation, despite worries that Brexit could wreak havoc on the economy.

Sentiment was also dented by US President Donald Trump's America First trade policy, which sparked a damaging trade war with China and others.

Wall Street did mark the longest bull market in August, a run that began amid extraordinary crisis-era monetary policy - but for which Mr Trump has claimed credit after his tax cuts and regulatory rollbacks.

Yet markets have since spiralled lower on slowing global growth, Italy's fiscal woes, a US government shutdown and Mr Trump's attacks on the Fed.

Investors also ran for cover over the uncertain nature of Britain's looming exit from the European Union in March.

"Stock markets have been on a wild ride this year and the US has been at the center," Oanda analyst Craig Erlam told AFP.

"Tax reforms hugely boosted earnings, bringing an economic boost with it," he said.

However, "the trade war with China and skirmishes elsewhere have weighed heavily on the relevant domestic markets which has dented investor sentiment".

Washington and Beijing imposed tit-for-tat tariffs on more than US$300 billion (S$410b) worth of goods in total two-way trade earlier this year, which has contributed to decline in profits and stock market plunges.

While concerns remain, relations have thawed since Chinese President Xi Jinping and Mr Trump agreed to a 90-day trade truce in December while the two sides work to ease trade tensions by March 1.

Chinese state news agency Xinhua quoted Mr Xi as telling Mr Trump both leaders want "stable progress".

"2018 has been characterised by a shift from low volatility, high liquidity and expectations of equity out-performance to high volatility, low liquidity and the return of a bear market in equities," said VTB Capital economist Neil MacKinnon.

"For 2019, a global economic slowdown - perhaps recession - looks increasingly likely," he warned. - AFP