Graphic: A (markets) journal of the plague year
20/12/2020 09:00
By Marc Jones and Ritvik Carvalho
LONDON, Dec 20 (Reuters) - Last December the first infection
with the new coronavirus was reported to the World Health
Organization. Twelve months later, as the charts below show,
global financial markets have been on a roller coaster like no
other.
JANUARY JITTERS
The virus even wasn't the first thing that spooked the
markets this year. The tone was set when an escalation of an oil
market turf war between Saudi Arabia and Russia sent oil prices
crashing over 5% on Jan 8.
Just days later though China's stock markets .CSI300 began
to fall as a cluster of more than 50 pneumonia cases in Wuhan
city sparked a warning from the WHO there could be a new
SARS-like virus. urn:newsml:reuters.com:*:nL8N29E03R urn:newsml:reuters.com:*:nL4N2950XW
Oil continued to fall as traders were also now worrying
about a drop in Chinese demand, but other major markets were not
seriously affected until mid-February when it became clear the
virus was rapidly spreading out of Asia.
Cue carnage. From February 20 to March 24 as Europe's big
economies locked down, MSCI's 49-country world share index
.MIWD00000PUS lost more than a third of its value
haemorrhaging a staggering $18 trillion.
Wall Street's S&P 500 .SPX , Dow Jones .DJI and Nasdaq
.NDX slumped 35%, 38% and 30% respectively. London and
Frankfurt's internationally exposed FTSE .FTSE and DAX
.GDAXI markets dropped 35% and 40%, Japan's Nikkei fell 30%
.N225 , whereas Chinese stocks saw a more modest 16% drop.
"In retrospect I felt I was one of the villagers in the boy
who cried wolf story," said Ben Inker, Head of Asset Allocation
at investment firm GMO.
"We had seen a number of potential pandemics never really
develop...we were assuming that this was going to be contained
and when it didn't we understood why the world was freaking
out."
For reference, the record quarterly drop for Wall Street was
40% in 1932 in the midst of the Great Depression. The fact that
the S&P and Dow were at record highs back in mid February made
the crash this time seem more brutal.
MARCH MADNESS
Governments were already trying to shore up their economies,
but just like the financial crisis a decade previously it took
powerful central bank medicine to steady the markets.
The Federal Reserve's move to cut U.S. interest rates to
zero in mid-March initially had zero impact, but once it opened
new swap lines to keep money markets flush with dollars and the
ECB and other big central banks arrived with their own measures,
the rout eased.
The amount of money and effort thrown at the problem has
been unprecedented.
BofA calculates that central banks have spent $1.3 billion
an hour buying up assets since March and made 190 interest rate
cuts this year, which works out as four every five trading days.
As well as fuelling the monster market rebound, JPMorgan
estimates the central bank moves have left nearly $35 trillion,
or 83%, of all richer, developed nations' government debt with a
'negative yield' once inflation is factored in.
It means investors are effectively paying for the privilege
of lending to those countries. Germany's finance ministry for
example says it has earned more than 7 billion euros ($8.51
billion) from issuing new bonds this year.
RECORD PLUNGE
Locking down much of the world economy has not been easy.
By April the International Monetary Fund was forecasting
global growth would to fall to -3 percent, a 6.3 percentage
point downgrade from its January estimate. Its latest forecast
is for -4.4% for the year. "This makes the Great Lockdown the
worst recession since the Great Depression, and far worse than
the Global Financial Crisis," it has said.
Unemployment and global debt levels have also surged and the
World Bank warns global extreme poverty is set to rise for the
first time in over 20 years.
It could push an additional 88 million to 115 million people
below the breadline this year and as many as 150 million by the
end of next year.
APRIL FALLS
Stock markets were beginning to recover in April but the
shocks did not stop. Oil went negative for the first time ever
CLc1 , dropping as low as minus $40 a barrel as oil producers
began to fear storage capacity could run out.
It did not last long though. By the end of April it was back
up to almost $20 a barrel and is now back above $50 - a 220%
gain for anyone brave enough to dive in - although it is still
down nearly 25% for the year as a whole.
WINNERS AND LOSERS
A breakdown of the best- and worst-performing stocks also
tells the story of the pandemic, which has now claimed over 1.6
million lives.
Malaysian rubber glove maker Supermax SUPM.KL and Korean
pharmaceutical firm Shin Poong 019170.KS have rocketed roughly
1,000% and 2,000% respectively.
The boom in working from home and video chat has lifted Zoom
ZM.O 490%. Moderna MRNA.O , one of the drug firms delivering
a vaccine, is up over 635%, sit-on-your-sofa stocks like Netflix
NFLX.O and Amazon AMZN.O have jumped 64% and 75%
respectively while the other big trend of the year - electric
cars - has seen Tesla surge 683% TSLA.O and its rival Nio
NIO.N charge up nearly 1,000%.
At the other end, cruise ship company Carnival CCL.N has
sunk 57%, scores of airlines ICAG.L , travel firms and
retailers have been battered, while aero engine maker Rolls
Royce RR.L has been pummelled nearly 50% for the year.
EMERGING HOPE
A seesawing of major currencies has also happened. The
safe-haven dollar =USD surged up until the mid-March
turnaround but is now down 6.66% for the year and 5% since late
September, whereas the euro EUR= and yen JPY= are up roughly
10% and 5%.
Sweden's crown SEK= is the top 2020 performer with a 13%
jump. A 6.6% surge for China's yuan will be one of its best
year's too though there is still plenty of pain in emerging
markets.
Brazil's real BRL= is down 20%. Russia's rouble RUB= -
one of last year's top performers - is down 15% despite a bounce
and near bullet-proof balance sheet. Turkey's lira TRY= has
climbed off record lows but is still down 22%, while Mexico's
peso MXN= and South Africa's rand ZAR= are both down around
4.4% although they were down 14% and 20% respectively at the end
of September.
NOVEMBER REIGNS
November was also key. First came the U.S. election defeat
for Donald Trump which raised hopes some of the global trade
tensions would ease. Then days later, the long-awaited news that
one of main vaccine hopes had proved over 90% effective in
protecting people from COVID-19.
That double boost saw a record 12.6% monthly leap in the
MSCI world stocks index adding approximately $6.7 trillion - or
$155 million a minute - to the value of world equities.
It is still going. Stocks are now up over 13% for 2020, U.S.
and German government bonds and corporate debt have all returned
between 10% and 13.5%, gold is up 25%, while the super-sized
FAANG tech stocks group are up 100%.
"The 2020 stock rally from lows is now bigger than 1929,
1938, 1974; high prices clashing with positioning (is) verging
on greedy bullish," BofA analysts wrote in note pointedly titled
'Frankenbull'.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Stress episodes for emerging market capital flows https://tmsnrt.rs/36psQ6i
COVID-19 winners and losers https://tmsnrt.rs/340bMCj
January jitters https://tmsnrt.rs/2KDTIXH
Trillion dollar carnage https://tmsnrt.rs/2LNVDtx
Speed, severity of coronavirus selloff eclipses previous market
dislocations https://tmsnrt.rs/3r6XSYV
G4 policy rates nearly sub-zero https://tmsnrt.rs/3mDnXf3
Global GDP growth https://tmsnrt.rs/37PBVEV
The 2020 oil price crash https://tmsnrt.rs/2LLWZVI
Central bank balance sheets swell https://tmsnrt.rs/3lBm7KY
Global debt on the rise https://tmsnrt.rs/2VBwILx
The rise of China https://tmsnrt.rs/2J3eGz2
2020: world stocks vs. a pandemic https://tmsnrt.rs/2J6aQoU
Dollar retraces after swap lines ease funding crunch https://tmsnrt.rs/2WE9y7P
World annual unemployment soars in 2020 https://tmsnrt.rs/3r4Gcxc
FX in 2020 https://tmsnrt.rs/2LS40o5
A markets journal of a plague year https://tmsnrt.rs/37vCLrN
Global stock market scorecard 2020 https://tmsnrt.rs/3p4VfoR
Electric (vehicle) dreams https://tmsnrt.rs/3rcB0as
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Additional reporting by Dhara Ranasinghe and Thyagaraju
Adinarayan in London; editing by Philippa Fletcher)
((marc.jones@thomsonreuters.com; +44 (0)20 7513 4042; Reuters
Messaging: marc.jones.thomsonreuters.com@reuters.net Twitter
@marcjonesrtrs))