Global stocks drop at end of record year for markets

01/01/2026 04:24 AST

Stock markets mostly fell Wednesday in thin trading, following a year of record gains for key assets as central banks cut interest rates and the tech sector boomed on growth of artificial intelligence. London's benchmark FTSE 100 index closed down 0.1 percent in a shortened trading day, having reached a record high Tuesday close to 10,000 points.

The index jumped more than 21 percent in 2025 - the biggest gain for 16 years - thanks to interest-rate cuts from the Bank of England as well as US Federal Reserve following drops to inflation. Across the globe, stock markets have struck record highs and enjoyed double-digit gains in 2025.

"To push meaningfully higher in 2026, equities will need confirmation that the Fed can deliver at least the two rate cuts still priced by the market, with growth unimpeded," noted Stephen Innes of SPI Asset Management.

The Federal Reserve's monetary easing in the second half of this year has been a key driver of global market improvements, compounding a surge in the tech sector on the back of the vast amounts of cash pumped into AI. Minutes of the Fed's policy meeting in December, which were released on Tuesday, indicated that most of its officials see future rate cuts as appropriate, should inflation cool over time as expected.

At the same time, concerns that valuations of AI stocks are too high gnawed at investors late in 2025.

AI chip juggernaut Nvidia became the world's first $5 trillion company at the end of October, while its current worth stands at around $4.5 trillion. The price of gold, seen as a safe haven investment, scored multiple record highs this year. The precious metal has benefitted from weakness to the dollar caused by the Fed's rate cuts and economic growth concerns triggered by President Donald Trump's war on tariffs.

Oil prices have retreated nearly 20 percent over the year, pressured by an oversupplied market.

Bitcoin, emphasizing the volatile nature of the cryptocurrency sector, soared to a record high above $126,000 in October before ending the year around $88,000. In stocks trading Wednesday, the Paris market closed down 0.2 percent after Hong Kong ended the year with a loss of nearly one percent.

Over the year, Hong Kong's Hang Seng index won 28 percent. Tokyo trading had ended Tuesday, with the Nikkei 225 jumping more than 26 percent this year and Seoul rocketed 75 percent. Frankfurt, which also ended its trading year Tuesday, rallied 23 percent in 2025, while Paris saw an annual gain of more than 10 percent.

On Wall Street, which holds a half day of trading on Wednesday, the main indices are set for double-digit annual gains with the tech-heavy Nasdaq Composite up over 21 percent for the year.

The MSCI All Country World Index, featuring a cross-section of major global companies, has an annual gain of around 21 percent. On Wednesday, the price of silver slid further having struck record highs in December.

AFP