The continuing Eurozone debt crisis weighed on global equity markets in December, as it had done for much of the year. The European Central Bank's move to make bank lending easier was seen as a positive move, but European markets varied widely in their performances over the month. Continuing positive domestic economic data helped the US market end the month higher, making it one of the best performers globally in 2011. In contrast the Indian and Chinese equity markets both ended the year lower, and while some other Asian markets did better poor economic news and the risk of regional political tensions had a dampening effect on South Korean equities.

The temporary absence of further bad news from Europe during December provided a breathing space for UK equities, after the violent storms of recent months. The FTSE All-Share index ended the month 0.8% higher, although over the year as a whole it was down. Lower food prices and slower price rises in some other commodities meant that CPI inflation showed another dip, falling to 4.8% for November, while the Bank of England predicted that it would be down to near the 2% target by the end of 2012. High street retail figures for November were poor and some retailers struggled to survive, with even Tesco reporting a drop in sales for the fourth consecutive quarter.

In the US the S&P 500 index ended the month 1% higher in US$ terms, helped by a steady stream of better economic news which boosted investor sentiment. US unemployment unexpectedly fell to 8.6% in November, the lowest since March 2009, although many of the new jobs recorded were likely to have been seasonal hires. Despite the rising costs of core commodities consumer confidence also improved, mainly thanks to lower fuel prices and reduced unemployment claims data. The Federal Reserve kept lending rates at between 0% and 0.15%, but weaker than expected retail sales in November undermined the strength of the US economy. House prices continued their decline, by 1.2% in October, to a level 32.1% down from the peak in 2006 according to the S&P/Case-Shiller index.

Upbeat economic news from Europe and the US prompted a rally in European shares in the second half of December, but it came too late to stop markets ending the month slightly lower. Yet another uninspiring EU summit failed to generate decisive positive action, and investor confidence was further undermined when ratings agencies threatened downgrades of Eurozone countries. The European Central Bank announced that it would not step up bond purchases, but it did introduce a second cut in interest rates and took important measures to facilitate bank re-financing. Third quarter figures showed a 1.9% contraction in the Irish economy and indicated that the Italian economy was back in recession, but German manufacturing contracted less than expected.

Japanese manufacturing was affected by the impact on supply chains of another natural disaster, this time flooding in Thailand, but equity markets were flat during December. Global economic uncertainty, particularly in the Eurozone, and the continuing strength of the yen put a brake on capital spending and led to a sharp drop in sentiment among major manufacturers.

Asian markets ended December broadly unchanged in US$ terms, although there were significant variations in performance. Lower inflation and hopes of further policy easing led Chinese equities higher, and ASEAN markets continued to outperform. Indian equities were lower on worsening economic news, high inflation and an apparent shortage of political leadership, while Korean equities fell slightly on fears of regional instability after the death of North Korea's Kim Jong-il.

Global emerging market equities fell during the month, ending a disappointing year in which they underperformed developed markets by 13%. Some Asian markets did record gains, but emerging European shares were brought lower by Eurozone debt worries, exacerbated in Russia's case by political concerns and lower oil prices. Latin American markets, with the exception of Chile and Colombia, were also generally negative despite positive economic data from both Brazil and Mexico.