Get 40% Off
🤯 Perficient is up a mind-blowing 53%. Our ProPicks AI saw the buying opportunity in March.Read full update

Global stocks stalled in Q3 as bonds boom and dollar zooms

Published 2019-09-30, 01:05 p/m
© Reuters.  Global stocks stalled in Q3 as bonds boom and dollar zooms

* Falls in emerging markets and Europe halts global stocks rally

* Hong Kong's Hang Seng has worst quarter in 4 years amid protests

* Fifth quarterly fall for yuan in the last six

* Oil cools after red hot start the year

* Dollar climbs over 3.3% in best run since Q2 2018

* World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Marc Jones

LONDON, Sept 30 (Reuters) - It has been a pivotal few months for financial markets. China and Europe have halted the global stocks rally, oil has cooled dramatically and rising recession worries have sent gold and government bonds charging again.

Perhaps it was to be expected after such a flying start to the year, but the deterioration in risk appetite has included some eye-catching milestones.

The switch back into support mode by the top global central banks has swollen the amount of bonds trading at negative rates -- where investors pay rather than get paid to lend -- to a record $17 trillion. 3.5% returns on U.S. Treasuries following the first Federal Reserve rate cuts since the financial crisis mean they are now having their best year since 2011 while calmer politics and ECB stimulus have given Italian bond markets their best quarter since Mario Draghi's 2012 "whatever it takes" vow.

"The shear size of the (bond) rally was quite impressive," said Hans Peterson, global head of asset allocation at SEB Investment Management. "And quite surprising," he added considering how low bond yields were already.

There has been much more divergence in equity and foreign exchange markets.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

On one hand, Wall Street's S&P 500 has added another 1% to its 19% H1 surge .SPX , Japan's Nikkei is up 2.4% .N225 and Turkey's battered stock market has bounced back almost 12% after torrid last 18 months. .XU100

In the drop zone though, Hong Kong's protests saw the Hang Seng .HKI lose 9% in its worst quarter in four years and plenty of emerging markets from South Africa to Saudi Arabia have buckled badly too.

MSCI's all country world index .MIWD00000PUS , which now tracks around 2,700 stocks in 49 countries is set for its first quarterly dip of the year but a near 2% rebound this month has limited the damage to a modest 0.5%.

A weaker yuan CNH= means China's big bourses are down as well in dollar terms despite Beijing's stimulus efforts in the face of the trade war. But then again so too are London .FTSE , Frankfurt .GDAXI and Paris .FCHI in Europe.

The dollar is up over 3% against a basket of top global currencies but sterling's additional Brexit worries mean it is down a bit more and the euro is more than 4% lower after the ECB's cut its interest into even more negative territory.

DOLLAR CHARGE

It's been the worst quarter for the Australian dollar, meanwhile, since the end of 2016 as its China-sensitive economy has spluttered while 6.5% has been lopped off its Antipodean cousin, the New Zealand dollar NZD=D4 AUD=D4 .

"The U.S. dollar has been very strong really against everything," explained head of currencies at State Street (NYSE:STT) Global Advisors, James Binny, citing global factors like the trade war.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

"It is getting to the point where it is quite expensive. As with anything it is difficult to pick the turning point, but it's like a stretched rubber band -- the more you stretch it the stronger the forces that bring it back."

Among commodities there has been a big split too, but there it has been between what's precious and what's not.

Safe-haven gold is up 4.5% XAU= and is now on its longest quarterly winning streak since 2011 having been rising since Q4 2018. Equally precious palladium XPD= meanwhile is up for a sixth straight quarter - its best run since 2000.

Industrial bellwether and China proxy copper MCU3=LX is at the other end of the spectrum. The red metal is down for a sixth quarter in the last seven. It has been black for oil too - it is down over 8% though that is after a 25% surge in the first half of the year.

In cyberspace Bitcoin is down 22% which might sound calamitous. But it was up 220% in H1.

What is perhaps more telling for the overall picture is that FANG stocks, which have been one of the big driving forces for equity markets in recent years, have struggled to make more than 1% this quarter as a set.

Facebook FB.O and Amazon AMZN.O are both down over 8%, Apple AAPL.O and Google GOOGL.O are both up over 10%, but streaming giant Netflix NFLX.O is down a hefty 27% having been up 38% for the year going into Q3.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

"The trend driver right now is the U.S.-China situation. That holds the levels and the direction for currencies now," said SEB's Peterson. "The tipping point will be if we get some real progress there."

https://tmsnrt.rs/2owviEI Global FX markets in 2019

https://tmsnrt.rs/2n2RPZf Emerging market stocks suffer in Q3

https://tmsnrt.rs/2nO2185

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.