World Markets End Volatile Year Mostly in the Black

Most world stocks markets finished 2016 in positive territory despite shock votes in Britain and the United States, but the outlook for 2017 is clouded by looming European elections and Brexit.

The year witnessed a wave of anti-establishment populism, which saw Britain vote to leave the EU and maverick billionaire businessman Donald Trump elected as US president, AFP reported.

Both unexpected outcomes sparked a brief tumble on global equity markets, but many have since staged a stunning recovery to finish 2016 in the black.

London’s FTSE 100 gained 14.3% over the year, while Frankfurt’s DAX 30 added about 6.9% and the Paris CAC 40 won 4.9%.

In the US, all three major indices enjoyed robust gains, with the Dow Jones Industrial Average jumping 13.4%, the S&P 500 9.5% and the Nasdaq 7.5%.

Japan’s Nikkei rose 0.4% in 2016, marking the fifth consecutive annual increase and registering its highest year-end close in two decades on optimism over the incoming US government.

Shanghai slumped more than 12% on the back of massive capital flight and a languishing yuan currency.

Canadian stocks slipped in a muted conclusion to a year that saw the S&P/TSX Composite Index rally more than any other developed market. The gauge fell 0.9% to 15,287.59 in Toronto on the last trading day of the year after a rally that has propelled the benchmark index to its sixth straight monthly advance. Weakness in material and energy shares offset gains in health care.

Canadian equities rose 18% in 2016, the biggest increase since 2009. The index now sits less than 3% from a record reached in September 2014. The S&P/TSX’s world-beating advance marks a reversal for the index, which slipped 11% in 2015 for its worst annual decline since 2008.

MSCI’s world index, which tracks shares in 46 countries, rose 5.6% for the year, its best performance in three years. On Friday, the index retreated 0.04% as weakness on Wall Street ate into earlier gains in Asia and Europe.

Equities continued to receive support from robust central bank stimulus programs in Europe, Japan and elsewhere, although the US Federal Reserve raised interest rates in December and signaled it plans more tightening in 2017.

A 50% jump in oil prices—fueled in part by the decision of the Organization of the Petroleum Exporting Countries to cut production—also supported stocks.

That helped boost the Bovespa in Sao Paolo, which jumped nearly 40% on strength in commodity prices and the resolution of an impeachment drama involving former president Dilma Rousseff, which ended with the installation of center-right President Michel Temer in August.

 FTSE Sparkles

Since Brexit, London’s FTSE 100 blue-chip index has soared to end the year in record-breaking form, as the British economy shrugged off the impact of the impending divorce from the EU.

“Fears of an imminent UK recession following Brexit proved wide of the mark thanks largely to the resilience of consumer spending,” NFS Macro analyst Nick Stamenkovic told AFP. “Indeed, Brexit was viewed as a local rather than global issue, prompting a sharp turnaround in the fortunes of world stock markets.”

Markets also briefly tanked on November 9 after Republican Trump defeated Democrat and market favorite Hillary Clinton to capture the White House.

Yet Wall Street has since enjoyed a blockbuster run with the Dow Jones Industrial Average making a push towards 20,000 points. In the end, the blue-chip index finished at 19,762.60, logging its best year since 2013.

New York has been boosted by expectations that Trump—who will be inaugurated on January 20—will honor election pledges to ramp up infrastructure spending, cut taxes and streamline regulations.

 Populism

Looking ahead to 2017, the spotlight is now on upcoming European elections. The Netherlands heads to the polls in March, followed by France in May, and Germany in the autumn.

Further gains by populist candidates would reverberate through Europe as Brussels moves into the thick of negotiations with Britain over Brexit.

VTB Capital analyst Neil MacKinnon also highlighted the region’s banking problem after the European Central Bank called for Italian lender Monte dei Paschi di Siena to receive a bailout of €8.8 billion ($9.26 billion). Italy’s stock market shed 10% over the year.