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Accumulator: Friday rally brings relief to torrid week
Global markets snapped a woeful run today, after a week when investors fled shares for bonds and gold.
by Sam Antrobus on Feb 12, 2016 at 17:21
Today's rally in global stock markets has brought some welcome relief at the end of a torrid week for shares.
Markets have been shattered as investor panic surrounding the health of the global economy triggered a rush towards gold and sovereign bonds.
As shown by our exclusive Accumulator data table, which covers the five days to yesterday, all developed markets suffered heavy losses, with the FTSE 100 registering an eye-watering 6% loss. A 3.1% rally on Friday has helped to softened the blow and – just – lift the index out of bear market territory, but it remains 8.6% lower since the start of the year.
Banks were the heaviest fallers, caught up in fears of recession and worries over the onset of negative interest rates, and their impact on bank margins.
But while the UK Banks index tumbled to a seven-year low, falls in the shares of eurozone banks were even more severe. European bank stocks ended Thursday 6.3% lower, taking their total loss for the year so far to 28%. Beleaguered German lender Deutsche Bank (DBKGn.DE) may have rallied 12.1% today, but it is still down 32% since the turn of the year.
While the MSCI Europe ex UK’s 4.9% fall was not quite as severe as the FTSE 100’s some of that is due to the 1% rally in the euro versus the dollar, which helped soften the blow for sterling investors.
As investor bearishness took hold during the week, ‘safe haven’ assets thrived. Gold and silver were up 9% and 6.9% respectively, with bullion surging to a one-year high on Thursday, in its biggest single-day rally since 2013.
Investors also flocked to bonds in the flight to safety. UK 10-year gilt yields hit record lows on Thursday, as gilt prices rose 2.4%, up 4.5% for the rolling month. The story for sovereign debt was much the same across key markets, as the price of US treasuries rose 2.1%, with eurozone government debt up 2.5%.
The yen, seen as a safe haven due to Japan’s trade surplus, was another popular destination, rocketing 5.7% in the week despite the efforts of the country’s central bank to devalue its currency.
That’s one reason why many UK investors in the country aren’t nursing losses, at 3.7%, quite as heavy as those suffered by domestic Japanese investors, who saw their stocks slide 10% in the period covered by our table. Friday’s 5.4% plunge in the Topix has meanwhile taken the index’s losses over the last five trading days to a staggering 16.5%.
Elsewhere, emerging markets suffered, although they weathered the storm better than their developed world counterparts. The MSCI Brazil index was down 4.8%, but the real damage was inflicted in oil-driven Russia, where the MSCI Russia index down 9.7%. Despite suggestions of a global cut in oil production by Russia’s state-run Rosneft (ROSN.MM) this week, the Russian stock market was powerless against an 11.3% slide in Brent crude.
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