U.S. Treasuries prices rose on Friday, consolidating their position as the best-performing asset class in 2011, while stocks and the euro were set to finish the year with losses that many investors expect to continue in 2012.
Benchmark 10-year Treasuries have returned nearly 17 percent this year, their largest gain since 2008. Among the best performers were gold and oil, which were set to finish the year with gains of 11 percent and 9 percent, respectively.
Growing fears about the euro-zone debt crisis have weighed on financial markets in 2011 and are expected to continue to pressure the euro into the new year.
The single currency hit a 10-year low against the yen and is down about 3 percent against the dollar for 2011. On Friday, it was 0.2 percent higher against the greenback at $1.299.
The euro has held up relatively well given the crisis we've seen, but that view is likely to come under pressure in the new year, said Simon Smith, economist at FXPro.
There is huge focus on what's going on in Europe. Next year is likely to be the year when either euro zone leaders send the region on a path toward greater fiscal integration or we see some of the more vulnerable countries having to leave.
Global stocks have also suffered due to the European debt crisis. The MSCI All-Country World index was poised to finish the year with losses of more than 9 percent, despite a gain of 0.4 percent on Friday.
A steady flow of encouraging U.S. economic data has cushioned losses on Wall Street. The broad Standard & Poor's 500 index is on track for a gain of about 0.4 percent for the year.
On Friday, the Dow Jones industrial average was down 9.20 points, or 0.07 percent, at 12,277.84. The Standard & Poor's 500 Index was down 0.01 point, or 0.00 percent, at 1,263.01. The Nasdaq Composite Index was up 2.54 points, or 0.10 percent, at 2,616.
European stocks inched higher in thin trading but were still poised to close the year with losses. The FTSEurofirst 300 index rose 0.78 percent on the day, trimming losses in the year to 10.8 percent.
TREASURIES LEAD GAINS
On the other hand, U.S. government debt prices were finishing the year with solid gains and yields close to all-time lows.
Benchmark 10-year Treasuries were up 12/32 in price on Friday, pushing the yield down to 1.8572 percent, well below the psychologically important level of 2 percent.
What the new year will hold for Treasuries depends on how the European sovereign debt crisis unfolds.
We have news that French President Sarkozy is back on the plane or train to Berlin on January 9, said Chris Ahrens, interest-rate strategist at UBS Securities in Stamford, Connecticut. We'll be wrestling with moderate to improving U.S. economic growth with this backdrop of what's going on in Europe.
Among other top-performing assets, U.S. crude oil prices were closing the year with gains of 9.2 percent. Oil had a volatile session on Friday, however, with prices ranging from $98.61 to $100.16.
Gold prices rose 1.98 percent on Friday, to $1,576.60 an ounce. The safe-haven metal has been as a top performer in 2011, even though many investors have begun selling
in the past few weeks as tight liquidity in the euro zone forced them to raise cash to meet financial obligations.
(Additional reporting by Luciana Lopez and Emily Flitter; Editing by Dan Grebler)