LONDON/SINGAPORE - Global stocks were on track to end 2025 ‍at record highs on Monday, while the dollar ‍hovered near its lowest in almost three months, reflecting investors' expectations of further Federal Reserve interest rate cuts next year.

The MSCI's world equity gauge was flat in early European trading ​as markets assessed comments from U.S. President Donald Trump that he and Ukrainian President Volodymyr Zelenskiy were getting "a lot closer" to a deal that could end the Ukraine war.

That left the global stock benchmark with an almost 21% year-to-date ⁠gain after Wall Street hit a record high on Friday and European shares touched an intraday record high in early trades on Monday.

INVESTORS ARE RELUCTANT TO DEFLATE POSSIBLE AI BUBBLE

As the year ends, investors retain expectations ⁠U.S. ‌rates will fall and are reluctant to sell out of a potential bubble in AI stocks as long as monetary policy remains supportive. They have also increased their exposure to safe-haven gold to hedge their bullish bets.

"We're not seeing runaway inflation risk as a base case so we're still thinking the Fed has room to cut," Fidelity International multi-asset portfolio manager ⁠Becky Qin said.

"So you can still build a case for a reasonably strong backdrop for risk assets." Investors took some profits on precious metals on Monday. Gold dropped 1.1% to $4,484 an ounce but stayed on track for its biggest annual gain since 1979 with a rise of over 70%. Silver climbed above the $80-per-ounce-mark for the first time in volatile trading on Monday before dropping back to $76.14. Charu Chanana, chief investment strategist at Saxo, said precious metals have been lifted this year by a mix of rate-cut tailwinds and hedging against geopolitical and fiscal uncertainty.

"Add supply worries and the move has turned parabolic. ⁠But the late-year, near-vertical surge, especially in silver, also raises the risk ​of higher volatility. Near-term, the risk is technical and positioning-led," Chanana said.

Three-month copper on the London Metal Exchange was 3.27% higher at $12,560 per metric ton, having set a record of $12,960 earlier on Monday.

US PRESIDENT SAYS UKRAINE TALKS ARE POSITIVE

Geopolitics was ‍in focus on Monday after Trump met Zelenskiy in Florida for what the U.S. President described as positive talks, although no agreement on bringing peace to Ukraine has yet been reached.

China's military, meanwhile, moved army, naval, air force and artillery units around Taiwan on Monday for ​its "Justice Mission 2025" drills, as the island said it would defend its democracy.

MSCI's broadest index of Asia-Pacific shares was 0.4% higher on Monday in a strong start to the final week of the year. Most Asian markets have recorded double-digit gains for 2025 as markets bet on the prospects for AI and set aside concerns about the impact of trade tariffs.

South Korea's Kospi rose 2.2% on Monday, on pace for its best year since 1999 after investors spread their AI bets beyond Wall Street in a trend that has also lifted Taiwanese equities 25% higher year-to-date.

The focus of investors in this holiday-shortened week will turn on Tuesday to the publication of the minutes of the Fed's latest meeting.

The U.S. central bank cut its main funds rate to a range of 3.5%-3.75% this month and money markets are pricing two further quarter-point cuts by September. Trump, who favours lower borrowing costs, said last week that the replacement for outgoing Fed chair Jay Powell would not be anyone who disagrees with him.

DOLLAR FLAILS AS FRAIL YEN FINDS SUPPORT

The dollar, flat against a basket of major currencies including the euro and the Japanese yen on Monday, stuck close to its weakest level since October. The yen firmed 0.3% to 156.14 per U.S. dollar after a summary of opinions ⁠from the Bank of Japan's policy meeting in December showed many board members saw the need for further rate hikes to contain ‌inflation.

That offered some support for the Japanese currency after it slid to 157.78 on December 19, prompting expectations of BoJ intervention.

In fixed income markets on Monday, Ukraine uncertainty supported euro zone government bonds, with 10-year German Bund yields edging almost 3 basis points lower to around 2.84% as the prices of the benchmark debt instruments firmed. That German yield was on track to end the year about 50 bps higher, however, following stimulus spending ‌pledges and the European Central Bank's ⁠strong signals that its rate-cutting cycle has drawn to a close. Benchmark Treasury yields were 3 bps lower at just over 4.1%.

Brent Crude futures rose 1% to $61.26 a barrel in volatile trading, having dropped more than 2% ⁠on Friday ahead of Trump and Zelenskiy's talks.

(Reporting by Naomi Rovnick in London and Ankur Banerjee in Singapore; Editing by Sam Holmes, Lincoln Feast and Barbara Lewis)