How coronavirus tore through global markets in the first quarter

Column chart of % change, by quarter  showing MSCI All World sees worst quarter since 2008

Global stocks are set for their worst quarter since the 2008 financial crisis under the pressure of the coronavirus pandemic. 

The wave of stress has been concentrated into six weeks of frenetic trading, as many of the world’s biggest economies went into lockdown and the outbreak shattered investor confidence.

Here is how some key asset classes have fared.


Line chart of S&P 500 in 2020 showing S&P 500 tumbled into a bear market

On Wall Street, the S&P 500 suffered its quickest fall into a bear market on record, taking just 16 days to slump from all-time highs and bring an end to an 11-year bull market.

“The speed of the declines is what stands out,” said Peter Oppenheimer, chief equity strategist at Goldman Sachs.

A measure of calm returned to the market by the end of March as governments and central banks put together packages to offset some of the worst economic effects of the virus. US stocks are nearly 16 per cent off their lowest levels of the year. Even so, they ended the quarter down 20 per cent from where they started. 

London’s FTSE 100 has suffered deeper falls, and is on track for its worst quarter since the 1980s.

Column chart of % change, by quarter  showing FTSE 100 set for worst quarter since 1987


Oil prices crumbled to their lowest levels in 18 years, hit by the dual shock of the biggest demand drop in history as lockdowns cut consumption and a surge in supply following the start of a price war between Saudi Arabia and Russia. 

US crude oil prices fell below $20 a barrel, while the international marker Brent fell to its lowest level since 2002.

Line chart of $ per barrel showing Brent crude has collapsed from $70 in January

Commodities ended the quarter under fire even as many other asset classes recouped some of their losses. “The orphaned asset class is commodities,” said JPMorgan’s strategists, noting that base metals have bounced just 5 per cent or so.


Line chart of Real effective exchange rates, ex-China showing Emerging market currencies crash

A scramble for dollars upended foreign exchange markets, as companies and banks hoarded the currency when revenues collapsed. As a result, the dollar clocked up its sharpest rise since the 2008 financial crisis in March, squeezing 8 per cent higher on a trade-weighted basis in the two weeks to March 23.

The greenback also moved higher against the Australian dollar to hit a record while the pound went on a wild ride, tumbling to multi-decade lows before recording a 7 per cent rebound last week in its best performance since 1985. The oil price war and the impact of the virus also hurt the Norwegian krone, which lost more than 16 per cent against the euro since January. Russia’s rouble fared even worse, losing 23 per cent of its value over the same period. 

Line chart of USD per GBP showing Sterling's wild ride in March

Emerging markets currencies, excluding China, fell to their weakest level since the 1990s — with the South African rand and the Mexican peso losing more than a quarter of their value against the dollar.

“Despite recent relief from policies, we expect markets to remain in turmoil,” Bank of America’s currencies strategists said. 


Line chart of 10-year yield  showing US Treasuries swing

Government bonds, normally considered the stable bedrock of financial markets, have been severely shaken.

An initial flight to safety after the viral outbreak quickly gave way to a more worrying phase of the crisis, as investors dumped their highest-quality government bonds along with riskier assets in a dash for cash.

The 10-year US yield spiked to more than 1.2 per cent from its all-time low in little more than a week as concerns mounted over the smooth functioning of what is typically one of the world’s most liquid markets. Volatility soared to its highest since the financial crisis.

At first, central bank rate cuts and liquidity operations seemed powerless to arrest the slide, but the announcement of unlimited US government bond purchases by the US Federal Reserve on March 23 marked a turning point. Yields around the world have fallen sharply and are not far above their lows from earlier in the month. 


Line chart of Investment-grade corporate bond yield index (per cent) showing Corporate bond yields rise as coronavirus concerns deepen

Investors backed away from the $10tn of corporate debt built up since the last financial crisis, sending the prices of bonds and loans tumbling.

The Federal Reserve stepped in to help calm investors, taking the unprecedented step of announcing that it would begin to buy investment-grade rated corporate bonds.

Editor’s note

The Financial Times is making key coronavirus coverage free to read to help everyone stay informed. Find the latest here.

As markets have stabilised, so has investors’ demand for buying new debt issued by companies looking to shore up their balance sheets to see them through the coronavirus crisis. A record amount of investment-grade debt was sold in the US last week.

Still, concerns remain, with Moody’s warning that the default rate for lower-quality, junk-rated issuers could exceed the levels seen in the 2008 financial crisis if the economic downturn extends into the second half of the year. 

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