Developments in the Middle East caused global stocks to remain nervous, as Iran fired missiles at US bases in Iraq in retaliation for a US drone strike that killed Qassem Soleimani, head of Iran’s elite Quds force. However, tensions appeared to ease as the weak progressed, with Iran admitting it had erroneously fired a missile that downed a Ukrainian passenger jet. Stocks were also cheered by the prospect that the US/China “phase one” deal would be signed next week.

The FTSE All-World Index rose 24% over 2019, its best year since 2009. US stocks closed 2019 with their strongest annual gains since 2013. European shares rose 26% over the year, their largest annual gains since the introduction of the euro in 1999. In the UK, the FTSE 100 of larger companies recorded its biggest annual gains since 2016, while the FTSE 250, seen as a better reflection of the UK economy, surged 25% for the year in its best performance since 2013. Chinese stocks ended the year over 34% higher, their best run since 2014, while Australian stocks recorded their strongest annual gain since 2009, rising 18% over the year.

Risk assets rallied on news that the US and China had struck a “phase one” trade deal. The decisive UK election result further boosted markets as it provided clarity on the Brexit outlook and resolved the parliamentary impasse. In a “phase one” trade deal, China is to buy at least $40bn of US agricultural goods annually while the US agreed not to proceed with a new escalation in levies on $156bn of Chinese consumer goods planned for Sunday 15th December. The US will also cut tariffs on $120bn of Chinese imports that were introduced in September but will maintain 25% tariffs on about half of all Chinese imports, worth about $250bn.

Global stocks started the week on a negative trend as the US stepped up its trade rhetoric and Beijing retaliated against Donald Trump’s decision to sign legislation supporting protesters in Hong Kong. However, reports that the US and China were near to signing a ‘phase one’ trade deal, plus better-than-expected US economic data, helped stocks to recover their earlier losses.

The week saw $70bn of corporate takeovers in just one day, including LVMH’s planned $16.6bn takeover of Tiffany and Charles Schwab’s $26bn deal to combine with TD Ameritrade. Smaller deals included Swiss drugmaker Novartis’ $9.7bn purchase of biotech The Medicines Company; a Mitsubishi Group-led consortium agreed a €4.1bn takeover of Dutch utility Eneco; and eBay sold its online ticketing business StubHub for $4.1bn to Viagogo.

Global stocks generally weakened on news that the “phase one” trade deal between Washington and Beijing might not be signed until next year as Chinese negotiators pushed for a broader rollback of tariffs. This revived concerns about the outlook for global economic growth and boosted demand for government debt.

Global stocks rallied on confirmation of the Federal Reserve’s monetary policy U-turn, but ended the week lower amid fears of a deepening economic slowdown. In contrast, bonds rallied sharply over the week.

Talks between the US and China continued, with both sides appearing keen to make progress ahead of the 1 March deadline, when the US is due to raise tariffs on Chinese imports into the country. President Donald Trump told reporters that it was more likely than not that a trade deal between the two countries would happen, and that the deadline for the talks could be extended. He also appeared to offer an olive branch to the Chinese telecoms company Huawei; his comments were seen to be laying the ground for a deal to halt the US-China trade war.

Talks between the US and China broke down without any progress, but the two sides will resume discussions next week ahead of a 1 March deadline, after which Washington could increase tariffs on $200 billion in Chinese goods in the event of no deal.

Global stocks gained, boosted by signs that Beijing and Washington may be making progress in breaking the impasse in their trade dispute. The IMF lowered its outlook for global growth in 2019, citing risks to the Chinese economy and Brexit.