It has been the worst quarter for world stock markets since the final three months of 2008.
That is no surprise when the coronavirus has blighted economies – and, accordingly, corporate earnings – everywhere.
Nonetheless, it is striking to compare the performances of individual markets.
Take the Asia-Pacific region.
It will surprise many that the two main Chinese stock indices, the Shanghai Composite and the CSI300, fell by 9.8% and 10% respectively.
That is a stellar performance compared with the 19.4% fall suffered by the Kospi, South Korea’s main stock index and the 16.3% fall notched up by the Hang Seng, the main index in Hong Kong.
And those in turn outshone the Straits Times index in Singapore, which fell by 23%, despite the island state proving largely immune to coronavirus, and the Nikkei 225, Japan’s main stock index, which fell by 20%.
Worse still were the falls suffered by the Sensex in India and the ASX 200 in Australia which, respectively, fell by 28.6% and 24%.
Paras Anand, chief investment officer for Asia Pacific at fund management giant Fidelity International, said there were a couple of factors at play in China’s outperformance.
He told Sky News: “When we look at the markets and China in particular they were trading at relatively low valuations coming into this so, in terms of the relative valuation of China relative to Asia versus other markets in the world, China was it was trading at more attractive levels.
“And secondly, you have seen a very strong quick response to the virus outbreak [from China]. I think there was a sense with the combination of the control measures and the fiscal stimulus measures, the policy measures that the government put in place, that the economy would return to normal growth over a reasonably near term period.”
Some markets, meanwhile, might arguably have fared even worse than they did. The Nikkei, which suffered its worst quarter since the end of 2008, would arguably have fallen further had it not been for heavy buying of exchange traded funds (ETFs) – an instrument that tracks the performance of a particular index or basket of assets – by the Bank of Japan.
European equity markets have fared worse than their Asian counterparts.
The Stoxx 600, the most widely-used pan-European stock index, is down by more than 23% since the beginning of the year – representing its worst quarterly performance since 2002. Some of the individual European country indices have done even more badly, with the UK’s FTSE-100 and Germany’s DAX down by 25%, the CAC 40 in France down by more than 26% and the MIB in coronavirus-battered Italy down by more than 27%. The IBEX in Spain, meanwhile, is down by nearly 29%.
In the United States, where the policy response from the Federal Reserve and the Trump administration is regarded by investors as having been more effective certainly than anything seen on mainland Europe, equity markets have traded more in line with those in Asia.
The S&P 500, the most wide-ranging and representative of the US stock indices, looks set to finish the quarter down by just over 18% – its second-worst quarter in history. The tech-heavy Nasdaq looks set to finish down by around 9% or so, a comparatively modest hit, reflecting the fact that some of its constituents – notably Microsoft, Tesla, Netflix, Amazon and Regeneron Pharmaceuticals – actually rose during the quarter.
Only the more narrowly-focused Dow Jones Industrial Average, consisting of just 30 stocks and which can be distorted by the outperformance of just a handful of constituents, has notched up a loss in the quarter approaching the 20%+ declines that have been commonplace in Europe. This quarter will be the worst ever first quarter for the Dow.
For the FTSE-100, this has been the worst quarter since the final three months of 1987, which included ‘Black Monday’ and ‘Black Tuesday’ in October that year.
Several sessions in March this year have gone into the record books, most notably the rout on Thursday 12 March, in which the index fell by 10.87% in a single day – the second-worst one-day fall in history after ‘Black Tuesday’.
So why have European stocks fallen so heavily? Partly it reflects the damage being inflicted in certain economies, most notably Italy and France, by coronavirus. German stocks have suffered because the fortunes of the DAX’s constituents are particularly tied to world trade and, in particular, to demand from Chinese buyers. And partly it reflects the general consensus that, even before coronavirus struck, parts of the Eurozone were already facing a recession this year.
It is no surprise to see the FTSE-100 being battered in the same way and particularly when the composition of the index is studied closely. The second and seventh-biggest companies in the Footsie, Royal Dutch Shell and BP, have both seen their earnings prospects dented by the oil price war that has broken out between Saudi Arabia and Russia, which has sent the price of crude oil down some 63% during the first three months of the year, its worst-ever quarterly performance.
Two more heavyweights are the mining giants BHP and Rio Tinto, respectively the sixth and eighth-largest stocks in the Footsie, whose earnings have been hurt by lower commodity prices. The price of copper has fallen by just over 20% since the beginning of the year, its worst quarterly performance since 2011, while aluminium has fallen by 15%.
The Footsie also includes a number of constituents whose fortunes are particularly closed tied to travel and tourism, the sector worst-hit by coronavirus. The single worst performer in the index during the quarter was Carnival Corporation, the cruise operator and owner of P&O Cruises, which has lost almost three-quarters of its value during the quarter. It is followed by International Airlines Group, the owner of British Airways, Iberia and Aer Lingus, which is off by just over 70%.
Just behind it is Melrose Industries, owner of GKN, a major supplier of parts to aircraft makers. It is down by 61%. Also badly hurt have been EasyJet, which is down by 59% and Meggitt, another aircraft components maker, which is down by 56%. Rolls-Royce, one of the world’s biggest aircraft engine makers, has seen its share price halve in value during the quarter.
A clutch of Footsie stocks have also seen their share price fall partly because of a decision to cancel or suspend dividend payments to conserve cash.
They include the Premier Inn owner Whitbread, down by nearly 38%; the broadcaster ITV, down by nearly 57%; the mining and commodity trading house Glencore, down by nearly 48% and the housebuilder Persimmon, down by just over 29%.
The Footsie also contains five banking stocks whose shares have also fallen in line with weakening prospects for the economies in which they operate and growing expectations that they will be ordered by regulators to suspend their dividends: Barclays is off by 48% during the quarter, Lloyds Banking Group by 49% and Royal Bank of Scotland by nearly 51%.
Africa and Asia-focused lender Standard Chartered is down by just over 38% and HSBC, the third-biggest company in the Footsie, is down by over 23%. The property giants British Land and Land Securities have fallen by 48% and 45% respectively after a number of their tenants in the retail sector failed to make quarterly rental payments after being forced to close their stores.
Then there have been specific factors: healthcare provider NMC saw its shares fall by 47%, before they were suspended, after it was rocked by an accounting scandal. M&G, the fund manager, has fallen by nearly 53% amid concerns over client outflows.
Only a handful of members of the UK’s blue-chip index have survived the rout and actually seen their shares rise during the quarter. They include Pennon Group, the owner of South West Water, whose share price has been boosted by plans to sell its waste arm, Viridor, for £4.2billion. National Grid, another utility renowned for its safe haven qualities, has also avoided the turmoil. So too did Reckitt Benckiser, the maker of Dettol and Lysol, whose share price was more or less unchanged on the quarter.
But the Footsie’s best-performing member during the quarter has been Polymetal, the Russian gold miner, reflecting the yellow metal’s near-7% gain during the quarter.
Gold was not, however, the best-performing asset class overall during the first three months of the year.
Treasuries, US government bonds, have done better still as fund managers have switched from equities into bond holdings. As the biggest and most liquid type of bond, US Treasuries have benefited from this, rising by more than 13% during the quarter. The trade became more attractive once the Federal Reserve announced open-ended asset purchases – Quantitative Easing in the jargon – and creating further demand.
It feels like an investment trend set to continue into the second quarter of the year.