LONDON (Reuters) – In December last year 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 nothing else.
JITTERS JANUARY
The virus was not even the first to hit the markets this year. The tone was set when an escalation of oil market turf war between Saudi Arabia and Russia pushed oil prices down above 5% on January 8th.
Just days later though China’s stock markets began to fall when a rally of more than 50 cases of pneumonia in the city of Wuhan triggered a warning from the WHO that a new virus similar to SARS could be present.
Oil continued to fall as traders were now worried about a decline in Chinese demand, but other major markets were not adversely affected until mid-February when it became clear that the virus was spread out of Asia quickly.
Cairn cairn. From February 20 to March 24 as Europe’s major economies were locked in, the global index of 49 MSCI countries lost more than a third of its value totaling a staggering $ 18 trillion.
(Graphic: trillion dollar carnage -)
The S&P 500 at Wall Street, Dow Jones and Nasdaq fell 35%, 38% and 30% respectively. Internationally exposed FTSE and DAX markets in London and Frankfurt fell 35% and 40%, Japan’s Nikkei fell 30%, but Chinese stock saw a 16% smaller fall.
“Looking back I felt like I was one of the villagers in the boy who told the story of a wolf,” said Ben Inker, Head of Asset Administration at GMO investment firm.
“We’ve seen a number of pandemics ever develop … we assumed this would be contained and when we didn’t understand why the world was raining.”
For information, the highest quarterly fall for Wall Street was at 40% in 1932 in the midst of the Great Depression. With the S&P and Dow peaking back in mid-February the crash this time looked more brutal.
(Graphic: Speed, severity of sales coronavirus eclipses previous market dislocations -)
LAST MURDER
Governments were already trying to shut down their economies, but just like the financial crisis of the previous decade they took powerful medicine from the central bank to keep the markets stable.
The Federal Reserve’s move to cut U.S. interest rates to zero in mid-March had no effect, but once it opened new swap lines to keep money markets afloat and the ECB and other major banks, with their own measures, arrived at the easing chase.
The amount of money and effort thrown at the problem has been unparalleled.
BofA estimates that central banks have spent $ 1.3 billion an hour buying assets since March and made 190 interest rate cuts this year, which works out to four every five trading days.
In addition to fueling the monster market reversal, JPMorgan estimates that central bank movements have left nearly $ 35 trillion, or 83%, of the government debt of richer developed countries with ‘negative result’ once inflation is included.
It means that investors are effectively paying for the loan benefit for these countries. The German finance ministry for example says it has earned more than 7 billion euros ($ 8.51 billion) from issuing new bonds this year.
(Graphic: G4 policy levels near sub-zero -)
(Graphic: Central bank balance sheets -)
PART CLEAR
Locking up much of the world economy was not easy.
By April the International Monetary Fund was forecasting global growth to fall to -3 percent, down 6.3 percent from the January estimate. It has the latest forecast for -4.4% for the year. “This means that the Great Depression is the worst recession since the Great Depression, and far worse than the Global Financial Crisis,” he said.
Unemployment and global debt levels have also risen and the World Bank warns that global extreme poverty will rise for the first time in more than 20 years.
It could push 88 million to 115 million more people below the bread line this year and as many as 150 million by the end of next year.
(Graphic: Global GDP growth -)
(Graphic: Global annual unemployment rising in 2020 -)
APRIL WELCOME
Stock markets were starting to recover in April but the hits did not stop. Oil went negative for the first time ever, falling as low as minus $ 40 per barrel as oil producers feared storage capacity could run out.
It didn’t last long though. By the end of April it was back up to nearly $ 20 a barrel and is now back above $ 50 – a 220% gain for anyone brave enough to dive in – though which is still down nearly 25% for the year as a whole.
(Graphic: 2020 oil price crash -)
WINNERS AND LOSSES
A breakdown of the best and worst performing stocks also tells the story of the pandemic, which has now gained more than 1.6 million lives.
Malaysian rubber glove maker Supermax and Korean pharmaceutical company Shin Poong have gone around 1,000% and 2,000% respectively.
The increase in working from home and video chat has built up 490% Zoom. Moderna, one of the drug companies that delivers vaccines, is up over 635%, sit-on-your-sofa stocks like Netflix and Amazon have jumped 64% and 75% respectively while the big move Another year – electric cars – saw Tesla rise 683% and its competitor Nio pick up nearly 1,000%.
(Graphic: Electric dream (vehicle) -)
At the other end, the cruise ship company Carnival has plunged 57%, scores of airlines, travel agents and retailers have been hit, and aircraft engine maker Rolls Royce has been pumped close to 50% for the year.
(Graphic: 2020 global market score chart -)
HOPE EMERGING
Sawing of major currencies has also happened. The safe-haven dollar went up to the mid-March turn but is now down 6.66% for the year and 5% from the end of September, but the euro and yen are up about 10% and 5%.
The Swedish crown is the top 2020 player with a 13% jump. A 6.6% rise for China yuan will also be one of its best years although there is still plenty of pain in emerging markets.
Real Brazil is down 20%. The Russian ruble – one of last year’s top players – is down 15% despite a kick and close to a defensive balance sheet. Turkey’s lira has climbed off the lows but is still down 22%, while Mexico’s peso and South Africa’s rand are down around 4.4% despite being down 14% and 20% respectively at the end of September.
(Graphic: FX in 2020 -)
NOVEMBER REIGNS
November was also important. First came the loss of the U.S. election for Donald Trump which raised hopes that some of the global trade tensions would succeed. Then days later, the long – awaited news was that one of the main vaccine hopes had proven to be more than 90% effective in protecting people from COVID-19.
That double-digit increase saw a monthly jump of 12.6% in MSCI’s global stock index add about $ 6.7 trillion – or $ 155 million per minute – to the value of global equities.
It’s still going. Stocks are now up above 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 FAANG tech stock group is high level up 100%.
“2020 stock collection from low is now greater than 1929, 1938, 1974; High prices counteract a (and) outrageous greedy bullish position, ”BofA analysts wrote in a note entitled ‘Frankenbull’.
(Graphic: Market magazine of pest year -)
Further statement by Dhara Ranasinghe and Thyagaraju Adinarayan in London; edited by Philippa Fletcher