* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh
By Sujata Rao
LONDON Dec 30 Oil prices edged down on Friday
but headed for their biggest annual percentage rise since 2009,
with world stocks also up nearly 6 percent over the year despite
concerns over China's slowing growth and weakening currency.
Global markets have fared surprisingly well in a year marked
by major political shocks, including June's Brexit vote and the
unexpected election of Donald Trump as U.S. president in
November. U.S. stocks have hit successive record highs and
emerging equities have rebounded 8 percent after three years in
the red .
Wall Street looked set to add to those gains, with index
futures pointing to higher opening levels .
The Dow Jones Industrial Average was poised for its best
annual performance since 2013.
Britain's blue-chip FTSE 100 index closed up 0.3
percent at a record high of 7,142.83 points after a pre-holiday
half-day session, having rose more than 23 percent from lows hit
immediately after the June 23 vote to leave the European Union.
MSCI's world index, which tracks shares in
46 countries, was up 0.1 percent on Friday, with many investors
having booked profits off the benchmark's 13 percent run since
The pan-European STOXX 600 index was up 0.3
Tokyo stocks closed lower, having erased most of the
year's meagre gains after the yen surged 21 percent against the
(For Reuters Live Markets blog on European and UK stock
markets see: reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets)
But oil has been the star of 2016.
Brent crude futures have bounced more than 50 percent
after three years of losses, thanks to output cuts by
key crude producers. The benchmark fell 16 cents to $56.68 a
barrel on Friday.
Other commodities too have rallied, with zinc, steel
and rubber posting annual gains of around 60
percent after suffering heavy losses last year.
In a note headlined "The underdogs bite back", asset manager
Schroders said government bonds were the only major asset class
not to have delivered positive returns in 2016, with equities
and commodities receiving a boost from President-elect Trump's
$1 trillion economic stimulus plan.
"Investors have bought into the Trump or reflation trade on
hopes of stronger growth, rising inflation and higher interest
rates. Risk assets are rallying, the dollar has strengthened and
capital has flowed out of emerging markets," Schroders told
The year is also notable for the growing chorus of voices
calling an end to the three-decade bond bull run. With inflation
on the rise, U.S. 10-year yields have hit two-year highs
and the European Central Bank has signalled it will
start trimming bond purchases.
The dollar pulled back 0.4 percent on Friday against a
currency basket but has strengthened in 2016 for the third
straight year, recently hitting near 14-year highs.
Britain's pound, which hit 31-year lows after Brexit vote,
is closing 16 percent lower against the dollar, its biggest
yearly fall since 2008.
Most analysts expect the greenback to rise further in 2017,
along with U.S. Treasury yields, with Trump's policies seen
boosting inflation and prompting the U.S. Federal Reserve to
hike interest rates more frequently.
The euro, however, has fought back this week, rising to
three-week highs versus the dollar, though the widening interest
rate gap with the United States has seen it fall 3 percent this
The single currency faces some key tests in 2017, with
Dutch, French and German elections expected to see a lurch
towards anti-establishment, anti-euro parties while concerns
remain over the health of Italian banks.
"Political risk shifts to Europe in 2017 with the risk of
an upset in France or Italy potentially threatening a break-up
of the euro," Schroders wrote.
The other major risk on the horizon could be China, where
the yuan has posted its biggest annual loss against the dollar
since 1994 when it started trading.
Fears are growing that capital outflows will spiral out of
control, further weakening the currency, depleting foreign
exchange reserves and possibly raising debt default rates.
Asset manager BlueBay noted that Chinese economic data
remained solid, capital flight would be a major concern and "a
dislocation in China remains the most likely driver of a market
(Editing by Tom Heneghan)