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

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, while European shares touched an intraday record high in early trades and futures indicated Wall Street would edge down from Friday's all-time peak.

RELUCTANCE 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.

"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. Gold dropped 2% on Monday to $4,438 an ounce but stayed on track for its biggest annual gain since 1979 with a rise of almost 70%. Silver climbed above the $80-per-ounce-mark for the first time in volatile trading on Monday before dropping back sharply to $75.09.

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.

TRUMP SAYS UKRAINE TALKS ARE POSITIVE

Geopolitics was in focus 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 0.3% higher in ​a firm 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 was flat against a basket of major currencies including the euro and the Japanese yen on Monday, staying close to its weakest level since October.

The yen firmed 0.2% to 156.26 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 2 basis points lower to around 2.85% 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 2 bps lower at just over 4.1%.

Brent crude futures rose 2.1 % to $61.92 a barrel in volatile trading, having dropped more than 2% ⁠on Friday ahead of Trump and Zelenskiy's talks.