So, with the London stock market closing early today, it’s time to wrap up.

Best wishes for the New Year. We’ll be back next week with the latest business and economic news, and the action in the markets.

Happy New Year! GW

Over on Wall Street, stocks are struggling to show much action on the final trading day of the year.

The Dow Jones industrial average, which hit record highs this week, has slipped by 15 points to 36,383, while the broader S&P 500 index is flat.

Many investors have already knocked off for the year, after benefitting from the S&P 500’s 27% surge during 2021.

US stocks benefitted from government spending, the Federal Reserve’s stimulus package, and stronger corporate earnings as the economy rebounded.

Here’s CNBC’s take:

“2021 was another exceptional year for U.S. equity markets,” Wells Fargo Investment Institute’s Chris Haverland said in a note. “The markets were supported by encouraging news on the pandemic and highly accommodative fiscal and monetary policies.”

Strong corporate earnings also boosted U.S. stocks, Haverland said. The estimated year-over-year earnings growth rate for 2021 is 45.1%, according to FactSet. That would mark the highest annual earnings growth rate for the index since FactSet began tracking the metric in 2008.

The economic and earnings rebound that started in 2020 carried over into 2021, lifting equity markets to record highs. While returns in 2020 were driven by price-to-earnings multiple expansion, returns in 2021 were driven by earnings growth,” Haverland said.

Ashtead Group, the industrial equipment rental company, was the best-performing FTSE 100 stock this year. It rallied by 73%, after its revenues were boosted by the global economic rebound.

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, explains:

Ashtead has roared back into recovery in 2021 after its business renting out construction equipment was severely dented in 2020. As major building sites whirred back into action, particularly in the US, revenue has come flooding back in, lifting shares by 68%.

Increased demand from emergency services and key industries like utilities and telecoms has helped buoy results and long term contracts with the Department of Health in the UK has helped its resilience

Aerospace group Meggitt surged 58%, following a takeover approach from US rival Parker-Hannifin which is being scrutinized by competition authorities.

Mining giant Glencore (+62%) was lifted by rallying commodity prices, while Royal Mail jumped 56% thanks to strong demand for parcel deliveries and its modernisation programme.

Specialty chemicals producer Croda gained 53%, after a record performance including producing ingredients used in Covid-19 vaccines.

Banks and oil companies also rallied this year, with Lloyds Banking Group gaining 31% and BP up over 29%.

Just in: Britain’s blue-chip share index has recorded its best year since 2016.

The London stock market has closed for the final time in 2021, with the FTSE 100 index up 14.3% for the year.

That’s its third-best year of the last decade, following a 14.34% tumble in 2020 after the pandemic caused markets to crash.

Shares were lifted through the year by economic optimism, as Covid-19 vaccine rollouts allowed economies to reopen. Investors shrugged off concerns about inflation and supply chain problems, with shares recovering from their tumble in November after the Omicron variant was discovered.

Global stock markets are ending the year close to record highs.

The MSCI World Index has surged around 17% this year, and is just 0.5% away from the record highs set in November (before omicron caused a selloff).

The flood of stimulus from central bankers and governments which started in the pandemic lifted markets through the year, along with optimism as economies reopened.

But after these gains, valuations are relatively high -- which is one of several crosswinds facing markets next year.

Matt Weller, global head of research at FOREX.com and City Index, says:

Generally speaking, higher starting valuations tend to be associated with lower future returns, though that relationship isn’t particularly strong over short (< 5 year) time horizons. Of course, bulls will argue that elevated valuation ratios are justified given the low yields on bonds, unprecedented liquidity injections, and comparatively high profit margins.

Notably, we may already be past “peak stimulus” globally. Across the major developed economies, fiscal policymakers are rapidly looking to rein in deficits to improve their balance sheets and mitigate inflation fears. Meanwhile, most major central banks are similarly looking to “normalize” monetary policy after cutting interest rates to 0% (or below in some cases!) and instituting massive asset purchase programs in recent years.

At the margin, government spending and interest rates will likely provide less of a tailwind for global indices in 2022 as compared to 2021 or 2020.

But despite the prospect of interest rates edging higher, equities should still benefit from the TINA (“There Is No Alternative”) trade in 2022, Weller adds;

Especially with inflation at multi-decade highs, the appeal of holding safe assets like cash and bonds is as low as ever; from massive financial institutions to individual mom-and-pop investors, everyone is feeling pressure to invest in stocks in order to maintain their purchasing power.

This dynamic, and the attendant low discount/hurdle rate for making new investments, should support global indices in the coming year.

Gold is set for its worst year since 2015, despite its traditional role as a hedge against inflation.

Bullion has dropped around 4% during 2021, from $1,900 per ounce in January to $1,817/oz today, in a year when crypto assets such as bitcoin were favoured as protection against expanding money supplies.

The prospect of higher interest rates has counted against gold, says Laith Khalaf, head of investment analysis at AJ Bell, as it doesn’t provide any income:

The resurgence of inflation has put some pep in the step of goldbugs, though the precious metal has really failed to shine since the early days of the pandemic, when it topped $2,000 an ounce.

Part of the problem may be that interest rates are also expected to rise, and as gold pays no income, it looks less attractive by comparison with interest bearing assets like bonds and cash. That dynamic can be expected to deepen in 2022, if central banks tighten policy as expected. The lack of any cash flows also makes the precious metal difficult to value and volatile – there’s a reason Bitcoin is called digital gold. Gold is known as a safe haven, but between 2011 and 2015 investors had to stomach a 40% fall, so it’s not an asset for the faint-hearted.

It works best as a small bit of insurance that acts a bit differently to other assets, so it should only make up 5 to 10% of a portfolio at most.

European stock markets have dipped this morning (those which are open, anyway), after a strong 2021.

France’s CAC index has slipped by 0.2%, but is still on track for a rollicking 29% gain this year, while the FTSE 100 is still 0.35% lower.

In Amsterdam, the AEX is slightly weaker, and up 28% this year.

Italy’s FTSE MIB (up 23% in 2021), Spain’s IBEX (+8%), and Germany’s DAX (+16%) are all closed, after helping drive the pan-European Stoxx 600 to a succession of record highs this year.

Consumers splashed out on online shopping, takeaways, home improvements and streaming subscriptions in 2021, as ongoing Covid restrictions limited where people could spend their money.

Households were more willing to splash their cash in 2021, and spending during the year was almost 6% higher than in 2019, according to a review of transactions by Barclaycard.

While non-essential shops remained closed at the start of the year, consumers spent their money online instead. Online retail spending surged by almost 88% in March 2021, compared with 2019, when it accounted for over half (52%) of all retail spend.

Spending on essential items rose by 11% over the 12 months, largely driven by supermarket shopping, which grew by more than 17%, as restaurants, cafes, pubs and other hospitality venues remained closed for several months of the year. Spending on takeaways and fast food climbed by 62%.

Consumers also spent considerably more on home entertainment, including on digital content and subscriptions, which rose by 47%, and electronics, which saw a 10% uplift in spending.

Online grocery shopping, a trend which looks set to continue beyond the pandemic, surged by over 97% during the year.....

More here:

Oil prices are set to post their biggest annual gains in 12 years.

Crude prices are up over 50% this year, lifted by the economic recovery from the pandemic, and cautious supply increases by the Opec+ group.

Brent crude started 2021 at around $52 per barrel, but is ending the year close to $80/barrel, having hit three-year highs over $86 in October.

Energy demand picked up as lockdowns eased and travel resumed, while Opec and its allies supported prices by gradually increasing production each month.

Australian brokerage firm CommSec’s Chief Economist Craig James says (via Reuters):

“We’ve had Delta and Omicron and all manner of lockdowns and travel restrictions, but demand for oil has remained relatively firm.

You can attribute that to the effects of stimulus supporting demand and restrictions on supply.”

The jump in oil prices pushed UK petrol prices to their highest level on record this autumn, contributing to the cost of living crisis facing households, and the rising costs being juggled by businesses.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

It’s the final trading day of the year, and what a year it’s been.

It began with the GameStop drama, when retail investors piled into meme stocks and battled hedge funds. It was dominated by the pandemic, with vaccines allowing economies to reopen,...and new Covid-19 variants leading to travel restrictions, lockdowns, and supply chain disruption.

Equity markets rallied, as corporate profits held up. Commodities surged, pushing up firms’ costs.

Central banks continued to stimulate their economies through the year, lifting markets, before persistently high inflation forced some to change tack.

The upshot - Britain’s blue-chip FTSE 100 index has gained over 14% as it recovered its losses early in the pandemic, one of its best peformances in the last 20 years.

Today is a half-day session, so we’ll have the final score by lunchtime.

Frankfurt and Tokyo wrapped things up yesterday, with Germany’s DAX gaining 16% and Japan’s Nikkei up 4.9% to its highest year-end finish since 1989.

Wall Street has had a corker of a year, with the S&P 500 index up around 27%, with mega-tech companies driving gains.

2021 has been an excellent year for equity returns, says Richard Flax, CIO at digital wealth manager Moneyfarm.

The second half of the year has seen a little more volatility than the first half - thanks largely to the Omicron variant causing uncertainty - but the likes of the US, Europe and Japan have seen strong growth.

Butm the situation is a little different for emerging markets and the Asia-Pacific region, Flax adds:

EM recorded negative performance in 2021, with the problems really starting in early summertime.

The primary reason for this dip in performance is China - the two principle issues affecting the largest economy of the bunch are the resurgence of Covid-19 and some disappointing economic growth figures. The Chinese government’s crackdown on large tech companies has also had an impact on the country’s ability to perform economically.

We’ll be tracking the action through the final day of the year, and looking ahead to 2022.