United States
Wall Street ended 2025 on a subdued note, with stocks extending a post-Christmas losing streak that dampened what had otherwise been a stellar year for equities.
The S&P 500 fell 0.7 per cent on New Year’s Eve, paring its annual advance to roughly 16 per cent. The Nasdaq 100 shed 0.8 per cent in its fourth consecutive session of losses, while the Dow Jones Industrial Average dropped 0.6 per cent. Despite the soft finish, both the S&P 500 and Nasdaq notched their third straight year of double-digit gains, their longest winning streak since 2021.
The year was defined by optimism around artificial intelligence’s economic potential and supported by Federal Reserve interest rate cuts. That said, it wasn’t a smooth ride. Traders navigated swings triggered by US trade policies, geopolitical tensions, concerns over stretched valuations, and uncertainty around monetary policy direction.
Looking ahead, historical patterns suggest investors shouldn’t expect fireworks on the first trading day of 2026. Since 1953, the S&P 500’s median change to kick off a new year has been a 0.3 per cent decline, with gains occurring less than half the time. The market has also fallen on the first trading day of each of the past three years.
On the economic front, weekly jobless claims fell to 199,000, one of the lowest readings of 2025 and well below economists’ expectations of 218,000. The resilient labour market data had little impact on markets in the thin holiday session.
US Treasuries recorded their strongest year of returns since 2020, though yields ticked higher on the final day, with the 10-year climbing five basis points to 4.17 per cent.
Europe
The UK’s FTSE 100 took a breather near record levels on New Year’s Eve, dipping 0.2 per cent in a shortened trading session after closing at an all-time high the previous day. The domestically focused FTSE 250 midcap index slipped 0.4 per cent.
But the soft finish couldn’t dampen what was a standout year for British equities. After years of underperformance, the blue-chip FTSE 100 outpaced major global markets in 2025, climbing more than 21 per cent for its strongest annual gain since 2009 and its fifth consecutive yearly advance.
The index’s outperformance came as something of a surprise. Expectations of further Bank of England rate cuts, strength in financials and miners, and the FTSE’s appeal as a relatively cheap diversifier during bouts of global volatility all contributed to its resurgence. The BoE delivered its fourth quarter-point cut of the year in December, though signalled the gradual pace of easing may slow further.
The resources-heavy index drew particular support from miners Fresnillo, Endeavour Mining, and Antofagasta, which advanced on the back of surging gold, silver, and copper prices throughout the year.
Not all constituents shared in the gains. Bunzl and Diageo each tumbled around 37 per cent, leaving the business supplies distributor and the world’s largest spirits maker among the index’s biggest laggards.
The broader pan-European STOXX 600 gained 16.6 per cent for the year, trailing both the FTSE 100 and the S&P 500’s 17.2 per cent advance.
Australia
The local market is pointing to a weak start to 2026, with ASX 200 futures indicating a 31-point, or 0.4 per cent, decline to 8,676 points when trading resumes at 10am AEDT.
The expected soft open extends a four-session losing streak that characterised the final week of 2025. That lacklustre finish consigned the local bourse to its weakest annual increase in three years, with the benchmark gaining just 6.8 per cent for the year, significantly trailing the S&P 500’s 16 per cent advance.
It was a year of two halves for Australian sectors. Healthcare emerged as the biggest laggard, with the sub-index plunging 25 per cent in its worst performance since 2002. Large-cap drug maker CSL bore the brunt, weighed down by earnings downgrades and delays to its Seqirus spin-off. Materials was the clear winner, surging 32 per cent in its best year since 2016, supported by rebounding commodity prices and US-China trade tensions that boosted rare earths miners.
Defence technology firm DroneShield was the benchmark’s standout performer, rocketing 303 per cent. Gold miners including Pantoro Gold, Resolute Mining, and Regis Resources also featured among the top performers, riding bullion’s record-breaking rally.
With thin volumes expected today, mining stocks could face pressure following sharp drops in precious metals prices. Attention will quickly shift to Wednesday’s monthly inflation figures, which investors hope will show the consumer price index cooling after spiking late last year.
The inflation picture remains a persistent headache. Headline inflation jumped to an annual rate of 3.8 per cent in October, while core inflation hit 3.3 per cent, both stubbornly above the Reserve Bank’s 2 to 3 per cent target band. Markets are now pricing a one-in-three chance of a rate hike at the RBA’s February meeting, with an increase fully priced by June.
Australia’s big four lenders are divided on the outlook. NAB and Commonwealth Bank expect the cash rate to rise to 3.85 per cent in February, while Westpac and ANZ believe rates will hold at 3.6 per cent through 2026.
Commodities and currencies
Precious metals took a hit on New Year’s Eve as investors locked in profits following an extraordinary 2025. Gold fell 0.6 per cent to US$4,311.88 an ounce, retreating after gaining 64 per cent for the year, its best performance since the 1970s. Silver tumbled 7 per cent after more than doubling in value over 2025. CME Group raised margin requirements on precious metal futures for the second time in a week following heightened volatility.
Oil closed out the year with its steepest annual loss since 2020, weighed down by geopolitical risks and steadily rising global supplies. West Texas Intermediate crude fell 0.9 per cent to US$57.43 a barrel on the final day of trading.
Copper was a bright spot for 2025, posting its best year since 2009, fuelled by supply tightness and expectations that demand for the electrification-critical metal will outpace production.
The US dollar was little changed on Wednesday but recorded its weakest year since 2017. Investors suggest further declines could materialise if the next Fed chair opts for deeper rate cuts than currently anticipated.
Bitcoin slipped 0.7 per cent to US$87,584, settling into a trading range of roughly US$85,000 to US$95,000 following an October crash that put the cryptocurrency on pace for its first annual loss in three years.
Economic Calendar
US:
- S&P Global Manufacturing PMI Dec 01:45
EU:
- HCOB Eurozone Manufacturing PMI Dec 20:00
This article was written by Calvin Curdie, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
