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7 months ago
Wall Street and oil take the 2016 spoils
December 22, 2016 / 2:51 PM / 7 months ago

Wall Street and oil take the 2016 spoils

6 Min Read

LONDON (Reuters) - Oil is set to be 2016's top market performer, with its near 50 percent gain an outcome few would have predicted when it plunged to a 12-year low in January.

In a year of shocks, including Britain's vote to leave the European Union and Donald Trump's election as U.S. president, several major assets have been on a rollercoaster.

"(Given) the fragility that markets started the year with and the events that then happened ... it is pretty remarkable how resilient things have been," State Street Global Markets head of macro strategy Michael Metcalfe said.

Crude surged from as low as $27 a barrel to just shy of $58 following two of its worst performing years on record. It dovetailed with large gains from copper CMCU3 zinc CMZN3 and tin CMSN3, and in currencies like Russia's rouble RUB= and Brazil's real BRL= which are both up 17 percent.

As this graphic - reut.rs/1WAiOSC - shows many stocks have not done badly either for investors.

On Wall Street, the S&P 500 .SPX and Dow Jones .DJI are up 12 and 14 percent, respectively, with gains accelerating after Trump's victory.

Tokyo's Nikkei .N225 is 5 percent higher in dollar terms while a 7 percent gain for emerging market stocks .MSCIEF will end a poor three-year run.

The dollar has risen for a third straight year, with all its 4.5 percent gains against a basket of major currencies .DXY coming since the U.S. election. tmsnrt.rs/2egbfVh .

The yen JPY= is still clinging on to a 2 percent gain despite a 12 percent plunge since the U.S. election. The euro EUR= is down 4.5 percent.

Brexit-battered sterling had the worst year of the FX majors. It has lost 16 percent on the dollar GBP=D4 and 12 percent against the euro, never recovering from a plunge to a 31-year low the day after the EU vote. tmsnrt.rs/2hwV9Hv

That's less than the Mexican peso's MXN= 15 percent drop and roughly the same as the Turkish lira TRY= which has had to contend with a failed coup attempt, a crackdown on tens of thousands of officials and a string of bombings.

London's FTSE .FTSE has boomed since Brexit, up 18 percent since the June vote, although almost flat on the year.

"Sterling's weakness has been very good for large-cap UK equities and we expect that relationship to hold," said JP Morgan Asset Management global market strategist Mike Bell.

"So we could have that slightly bizarre environment whereby bad news for the UK economy is good news for UK equity market."

Metals Shine

Benchmark 10-year U.S. Treasuries US10YT=RR are level for the year but have lost 5 percent since Donald Trump's election and last week's quarter-point rise in U.S. interest rates.

Other fixed income markets have followed. German Bunds DE10YT=TWEB have lost 6 percent since the U.S. vote, corporate bonds have fallen 3.5 percent and emerging market dollar and local currency debt have slid 4.2 and 6.5 percent respectively.

But for the year overall the story looks different. Emerging market dollar and local debt have both earned investors around 9 percent and high-yield bonds have returned over 14 percent.

Analysts at Goldman Sachs say it is the best year since 2009 and has only been bettered 5 times in the past 30 years.

The clear winners though have been commodities and most things linked to them.

Thanks to the stellar gains for metals, Europe's mining firms .SXPP have soared 60 percent with big names like Anglo American (AAL.L) and Glencore (GLEN.L) up 280 and 200 percent respectively.

Gold XAU= is up almost 7 percent despite being one of the assets hit hardest since the U.S. election. In agriculture robusta coffee LRCc2 has jumped over 40 percent and sugar SBc1 is up over 20 percent.

At the other end of the table has been one of last year's star performers, Chinese A shares .SSEC. Tighter regulations and jitters about the China economy and the yuan CNYUSD=R have driven an 18 percent slump in the stocks in dollar terms.

And if you thought it has been a bad year for Britain's pound, it's been small change compared to Egypt's pound EGP= which is down 60 percent having continued to slide after a 33 percent devaluation in November.

Editing by Jeremy Gaunt

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