Full Story: worst FTSE decline since 2008
Here’s the full story about the markets’ bad year:
Best wishes for 2019!! GW
With the Dow up more than 200 points today, Wall Street could yet end a rough month on a moderately high note.
As MarketWatch puts it:
The Dow Jones Industrial Average (+0.84% today) has declined 9.7% thus far in December, while the S&P 500 index (+0.5%) is down 9.9% during the period, and the Nasdaq Composite Index (+0.55%) is off 10.2% through Friday’s close. Those declines would represent the worst monthly drops since October 2008, according to FactSet data.
For the year, the Dow is in line for a 6.7% loss, with the S&P 500 down 7% and the Nasdaq Composite on pace for a 4.6% fall.
Trading on Monday, however, was looking up after investors saw reasons to buy in recent tweets from President Donald Trump about putative trade-negotiation progress between himself and Chinese leader Xi Jinping via weekend phone conversations.
At the risk of flattening your NYE fizz, there are plenty of reasons to fret about 2019.
Weak retail spending, falling house prices, a new chapter in the eurozone crisis or a deeper US-China trade war could all herald a recession. As could Brexit.......
Richard Stone, chief executive at The Share Centre, says Brexit is the key factor determining if the FTSE 100 recovers, or stumbles, in 2019.
He writes:
No one really knows how that is going to resolve itself and it would be a brave (or untruthful) person who said they did! My central expectation – amidst a range of possible outcomes – is that an extension to Article 50 will be requested to allow time for a second referendum as Parliament fails to coalesce around any outcome to deliver Brexit and instead abdicates its responsibility back to the people clothed in the claims that this presents the most democratic resolution of the issues. This will then likely lead to a vote to Remain, likely followed by a General Election.
“If that happens I believe the markets will continue to be volatile in early 2019 but will rally on the prospect of no Brexit. This will also likely result in a bounce in the value of Sterling which will temper the rise, or at least the pace of the rise, in the FTSE 100 slightly due to the overseas earnings component of many of the FTSE’s constituents.
The other factor, of course, is Donald Trump:
“Away from Brexit more volatile US politics and potentially increased trade tensions as President Trump continues to promote an ‘America First’ agenda as he starts his re-election campaign will likely weigh on US markets or at the very least cause them to be more volatile. We have already seen some of this since the mid-term elections in November 2018.
Plus, the FAANG stocks (Facebook, Amazon, Apple, Netflix, and Google/Alphabet) face a crunch year:
“Finally, the drive towards greater regulation and taxation of the tech giants will likely weigh on some of their performance. Personal investors will need to be alive to trying to identify the new emerging companies or trends.
On Twitter, the economics team at ACS Hillingdon International School are asking whether this year’s losses are a buying opportunity.
Time to buy?
— Economics at ACS Hillingdon International School (@ACSHillEcons) December 31, 2018
FTSE 100 suffers worst year in a decade, falling 12.5% in 2018 - business live https://t.co/CmDER6E24v
I certainly don’t give investment advice #CaveatEmptor .
But here’s Laith Khalaf, senior analyst at Hargreaves Lansdown:
‘The UK stock market has definitely felt the heat of the Brexit burn in 2018, with domestically-focused UK companies finding themselves under pressure as politicians seem unable to agree on the UK’s withdrawal from the EU. It’s actually been a pretty poor year for markets globally though; Europe, Japan and Emerging Markets are all sharply down on the beginning of the year, and while the US has held up better, it’s still in negative territory, and has witnessed a pretty dramatic fall in the last three months.We’re unlikely to see the gloom lift in January. Brexit looks set to reach a parliamentary crescendo, and a swathe of trading updates from the UK high street isn’t likely to lighten the mood.
Despite the negative sentiment, it’s unwise to bet on the direction of the stock market in the short term, as it’s prone to defy expectations, sometimes for the better, sometimes for the worse. The appeal of putting long term savings to work in the stock market still remains, though investors who are concerned about its immediate prospects should consider drip-feeding money in gradually, to take advantage of any dips.’
Over in New York, investors are attempting to inject some New Year jollity into proceedings.
The Dow Jones industrial average is up around 0.6%, or 150 points, at 23212 points, as Wall Street’s worst December since 1931 heads towards the exit.
After 2018’s losses, what might next year have in store for investors, and everyone else?
Andrew Milligan, Head of Global Strategy at Aberdeen Standard Investments, believes 2019 will be a “middling year from an economic point of view”.
He told us:
“The world economy is not in a bad place at the start of 2019. We’ve talked of the slowdown in Europe and China, but it’s still trend growth. America is above trend and will decelerate during the course of this year, but there are very few signs, currently, of any major economic problems in the immediate future.
The oil price is lower, which helps. The Fed has hinted that it will not be as aggressive. Inflation is not a concern. There are debt issues out there. China remains the most worrying one.
Housing markets in some countries are stretched. There is emerging market debt in some countries.”
Milligan said a potential downside could be a “negative feedback loop” caused by falling share prices, discouraging companies and consumers from spending.
“Confidence and sentiment do matter. One can just see people being more cautious about spending and investing and the economies, just as we’ve seen in Europe this year, slow and slow. That would be an adverse headwind.”
He added that potential upside could come from Trump and Xi coming to agreements to resolve the US-China trade dispute.
The US stock market may manage a last-ditch rally, after Donald Trump tweeted that he was making progress over trade talks with China.
US stock markets set for gain on US-China trade progress https://t.co/Ac9Tn7kpOW pic.twitter.com/h42I4zjf2C
— Tradercliq (@tradercliq) December 31, 2018
UK housebuilders also had a rough 2018, hit by Brexit worries.
Taylor Wimpey’s market capitalisation has slumped by a third, while Berkeley Group are down 17%.
Shares in tobacco firms went up in smoke this year.
British American Tobacco lost half its value during 2018, tumbling in November when US regulators proposed a major crackdown on menthol cigarette sales.
But online grocery retailer Ocado bucked the gloom, almost doubling in value this year after securing deals to supply its technology to overseas supermarkets.
Stock markets across Europe have had a torrid year, with all the main indices shedding at least 10%.
Here’s the damage:
-
UK’s FTSE 100: down 12.5% in 2018
-
German DAX: down 18%
-
French CAC: down 11%
-
Italian FTSE MIB: down 16%
- Spanish IBEX: down 14.9%
£242bn wiped off the Footsie this year
The London stock exchange have confirmed that £242bn was wiped off the companies which make up the FTSE 100 during 2018.
Here are some more facts from the LSE:
- FTSE 100 highest point in 2018 was 7877.45 on 22 May 2018
- FTSE 100 lowest point in 2018 was 6585.91 on 27 December 2018
- Last time FTSE 100 closed down at year end was 31 December 2015: -4.93%
- Highest % daily rise in 2018 was on 5 April: +2.35%
- Highest % daily fall in 2018 was on 6 December: -3.15%
FTSE 100 suffers biggest annual fall since 2008
Newsflash: Britain’s stock market has suffered its worst year since the financial crisis.
The FTSE 100, which tracks the biggest companies listed in London, has shed 12.5% of its value this year -- or more than £240bn (by my maths).
The Footsie has just closed down 5 points at 6,728 points. It started this year at 7,687 points, before being rocked by fears over the global economy, fuelled by trade wars anxiety, and Brexit uncertainty.
The FTSE’s poor performance has helped to drag global markets deep into the red too.
As explained earlier, the MSCI index of global stocks has fallen by around 11% during 2018, while the Chinese market has tanked by a quarter.
Updated
The pound is ending the year with a small rally.
Sterling is up 0.5% against the US dollar at $1.277, and 0.6% higher against the euro at €1.116.
These are the highest levels since Theresa May was forced to postpone the parliamentary vote on her Brexit deal, to avoid a huge defeat.
The government continues to push for improvements to May’s deal, to assuage MP’s concerns over the Irish backstop. But there’s still no breakthrough.
Theresa May's spokeswoman says the Prime Minister has spoken to EU leaders over the Christmas break and there is still work to do to get assurances needed over the Brexit deal
— Sky News Breaking (@SkyNewsBreak) December 31, 2018
What a difference a year makes!
On the last trading day of 2017, City traders were celebrating the news that the FTSE 100 had hit a new all-time high.
As we blogged at the time, the blue-chip index gained over 7% during the year to finish at 7,687 points. That’s more than 12% higher than today’s levels.
Other countries did even better, helping to drive globe stocks up by a sizzling $9 trillion during the year.
Updated
Analysts at Mizuho Bank have cautioned against getting carried away by Donald Trump’s claim that he’s held “very good” talks with Chinese president Xi Jinping.
They told clients:
Whilst President Trump has lauded ‘big progress’ in trade talks with China following a phone call with Xi during the weekend, it remains to be seen how much this can boost investor confidence given that market reaction on recent positive development has largely been muted.
We’ve seen plenty of dramatic scenes at the world’s stock exchanges this year, with traders wallowing in gloom as shares crash, or beaming with delight as shares recovered.
That’s delivered a bumper crop of photos from the trading floors, and no-one sums up the mood better than veteran trader Peter Tuchman - who has a real knack for capturing the state of play.
My colleague Dominic Rushe caught up with Tuchman, and reports:
Like most celebrities in real life, Tuchman is smaller than he looks. Twin clouds of white hair, echoed by snowy facial fuzz, frame a bald pate that slopes gently down to expressive eyes on a face that seems perpetually in motion, as are his hands and feet. Tuchman is a human emoji, a one-man metaphor for the mood of the market. But don’t be fooled by the clowning – Tuchman is a cool cat. What you are seeing is not necessarily what he is thinking.
Tuchman, 60, came late to fame. The born-and-bred New Yorker had already been working on the floor of the NYSE for some 20 years when he first made the front pages. It was 2007 and the financial crisis was dominating the news cycle. On another day of wild swings Tuchman, snapped mouth agog, appeared on the front of the New York Post. “I had just received the bill for my son’s barmitzvah and it was way more money than I anticipated,” jokes Tuchman.
But Tuchman’s jollity has a serious side too:
His sangfroid, Tuchman says, comes from his parents. Marcel and Shoshana Tuchman were Holocaust survivors who were imprisoned in Auschwitz and Bergen-Belsen. “My father was a slave laborer for Siemens Corporation, which is still a public company here,” he says, nodding ruefully at the trading floor.
His grandmother was murdered in front of his father, most of whose family were also murdered by the Nazis. “As was my mother’s,” he says. “My father went up against Josef Mengele, the death doctor [who performed deadly experiments on Auschwitz prisoners], as did my mother. My mother’s whole family was gassed. They could have come out of that, you know, being angry and depressed, negative-minded people; they didn’t. There are two options in this thing. You can come out of challenges trying to devour every day and looking at life as if the cup is half-full or you come from a negative point of view that you’re a victim and the cup is half-empty. I vote for the former.”
Marcel Tuchman, who worked until he was 93 teaching medicine, died earlier this month aged 97. His son was back at work the next day. “My father always said: ‘When I die, cry and go to work.’ That was his advice.”
Here’s the full piece:
Fiona Cincotta of City Index points out that UK-focused companies are having a decent morning (after a pretty ropey year).
The FTSE opened the last trading day of the year a touch higher with a mixture of consumer, property and mining companies making moderate gains.
With the pound firmer against the euro and the dollar, FTSE gainers were mostly companies with a strong domestic focus except for miners which were helped by stronger copper and oil prices.
LONDON: open for its final trading day of what's been a bad year with the FTSE limping +0.18%
— Keith McCullough (@KeithMcCullough) December 31, 2018
Updated
Unless Wall Street manages the mother of all rallies today, it will suffer its worst December since the Great Depression.
Strange things would have to happen today to not make this the worst December month for the S&P 500 Index since 1931! pic.twitter.com/7UYL65b7lw
— jeroen blokland (@jsblokland) December 31, 2018
With less than two hours trading to go in London, the FTSE 100 is up 17 points at 6751.
That’s 12% lower than this time last year....
Holger Schmieding of German bank Berenberg suggests there are four “extraordinary political mistakes” which might trigger fresh market mayhem in 2019.
They are:
- for Italy’s radical government to plunge their country into a genuine Greek-style debt crisis;
- for Britain’s mostly pro-EU political class to simply let the train roll towards and then over the hard Brexit cliff instead of using the ten weeks between the likely death of May’s Brexit deal and Brexit day on 29 March 2019 to stop it through a softer Brexit option or a new vote to stay in the EU;
- for Donald Trump to hurt the US economy and impair his chances of re-election in late 2020 by going too far in his costly trade wars in 2019;
- for China to let a hard landing happen instead of using its ample policy toolbox to smooth the inevitable slowdown in cyclical momentum and trend growth.
Now the good news. He doesn’t think they’re particularly likely...
For example, Italy’s budget passed last night, showing that the EU and markets have imposed some rudimentary discipline on Rome.
Separately, Trump’s latest musings on progress in talks with China support hopes that both sides will try to strike some deal in coming months even if some of the thorny issues between the geostrategic rivals will probably not be fully resolved for many years.
So, Schmieding suspects that markets may pick up during 2019:
Chances are that, after a rocky start to the New Year, a less negative narrative can unfold later in 2019. That we have finally put an unexpectedly difficult 2018 behind us need not remain the only reason to celebrate the advent of a New Year tonight.
Hong Kong’s stock exchange managed a last-minute rally today.
The Hang Seng jumped by 1.3%, lifted by Donald Trump’s latest optimistic tweet about the trade negotiations with China.
But that still leaves the index down 13.6% for 2018, its worst year since 2011.
Updated
Commodities suffer first annual losses since 2015
The last 12 months have proved difficult for investors in stock markets around the world as fears over global growth mount up, and for many owners of commodities 2018 has proven equally tricky, my colleague Jasper Jolly writes:
Prices for oil and gold, two of the most traded commodities, are both set to fall for the first calendar year since 2015.
Futures for Brent crude oil, the North Sea benchmark, gained a dollar in value today, but that has not been enough to recover losses for 2018, which currently stand at around 18%. Fears of a supply glut amid weakening growth in China and other major economies depressed prices to just over $54 per barrel. Losses for West Texas Intermediate, the American benchmark, have been steeper, at 23%.
Gold is seen as the financial safe haven par excellence, but it is on course to suffer its first annual decline in three years. Gold futures prices slumped from above $1,350 per troy ounce in the spring to below $1,200 in the late summer. They have since recovered for a 2% fall during 2018 – stronger than the performance of silver, prices of which have fallen by 9%.
Cocoa was the top gainer among major traded commodities in 2018, leading a field of strong performances from a select group of agricultural commodities. Cocoa futures prices have gained more than 27%.
Speculators looking further afield at cryptocurrencies – which share some characteristics with commodities – would not have been rewarded. Those who had bought bitcoin at the end of 2017, near the height of the cryptocurrency mania, would have lost almost three-quarters of their money.
Updated
Naeem Aslam of Think Markets blames monetary policy tightening by the world’s central banks for this year’s losses.
The Fed stopped printing easy money a few years back and increased the interest rates four times this year. The European Central Bank also ended up its quantitative easing program and there has been several discussion on the topic of the ECB normalising the interest rates.
All in all, almost all the European indices are down more than 10 percent over this year and some of them are down over 15% (DAX) for this year. The Euro Stoxx 500 index is down by 13% this year—the biggest loss since 2008. The fact is that things aren’t looking really any brighter in 2019 as well because there are plenty of risk events which are going to keep investors on their toes.
For instance, at the beginning of the year, the first thing which investors will have to deal with is the Brexit chaos the UK leaving the European union. Then we have the US trade war with China and the ongoing struggle about securing the funds to build the wall.
Donald Trump’s claim that he’s making ‘big progress’ in the trade negotiations with China may be giving world markets a small boost today.
Wall Street is expected to open higher in a few hours time, following the news that presidents Trump and Xi spoke over the weekend.
Global stock mkt pin hopes on Sino-US talk as year end deep in red. Asia, Europe, US Futures gain amid optimism around trade talks between 2 of world’s largest econs. Almost all Asian indices in red in 2018 w/ India a rare gainer. Bonds finishing strongly as mkts bet Fed is done. pic.twitter.com/gJms1AVzuS
— Holger Zschaepitz (@Schuldensuehner) December 31, 2018
European stock markets have started trading, but there’s little drama yet.
In London the FTSE 100 index has gained 10 points, led by online supermarket Ocado (+2.1%), budget airline easyJet (1.7%) and web estate agent RightMove (1.5%).
The French CAC has gained 0.5%, with Spain’s IBEC up 0.4% and the Netherland’s AEX up 0.3%.
So with trading thin, and little news about, European stocks seem certain to suffer their worst year since 2008, as this chart shows.
Australia’s stock exchange has closed for the year, after yet another day of losses.
The S&P/ASX200 index dipped by 0.14%, taking its combined losses in 2018 to over 9% - the worst year since 2011.
Another reason to worry about China’s economy:
China auto sales down another 16% in November. Sales decline accelerating. pic.twitter.com/7OWjnNDWSx
— ASY (@doumenzi) December 30, 2018
In a worrying signal for 2019, China’s manufacturing sector is now contracting.
The official factory Purchasing Managers’ Index (PMI) fell to 49.4 in December, official data shows, a two-year low.
That’s below the 50-point mark that shows if activity rose or fell.
Manufacturers were hit by falling orders, with new export orders dropping for the seventh month in a row. That suggests the tariffs imposed on Chinese goods at the US border are hitting demand.
Mike Van Dulken of City firm Accendo Markets says this data “may fan the flames of concern about slowing global growth”. More here.
The worst-performing market this year? China.
China’s stock markets have suffered a particularly bleak 2018.
The Shanghai composite index has crashed by 25% this year, leaving investors suffering very heavy losses.
The trade war with the US has acted like a lead weight on many stocks, of course, but there’s also concern that China’s economy is weakening.
My colleague Lily Kuo explains:
“People have started to reduce or even stop spending money because they don’t expect the economy will perform well,” said Ye Tan, an independent economist based in Shanghai. “Companies and individuals are wary about the economy.”
Going into 2019, China faces not just a slowing economy but also a protracted trade war with the US, a pile of debt that threatens the world economy along with the Chinese financial system, and a populace demanding better environmental, labour, and health protections.
Shanghai is closed today, as China prepares for the New Year celebrations. Investors deserve the break.
Introduction: 2018 and all that selling
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
It’s the final day of the year, and many investors will forgiven for wishing ‘goodbye and good riddance’ to 2018.
The last 12 months have been pretty tough in the markets. Global stocks have suffered their worst losses since the financial crisis of 2008, wiping around 11% off the MSCI All Country World Index of stocks.
In London, the FTSE 100 is limping towards the end of a rough year. The blue-chip index has shed 12% of its value since the start of January, hitting a series of two-year lows -- in a blow to pension funds and savers big and small.
The big worry is that the long bull market, which reared up after the great recession ended in 2009, is now over.
Anxiety over trade wars, a slowing global economy, Donald Trump’s increasingly erratic behaviour and US interest rate hikes have all hurt stocks this year.
In Europe, the tortuous Brexit negotiations and the long-running row between Italy’s populist government and Brussels have also worried investors.
Trevor Greetham of Royal London Asset Management explains:
We were surprised at the ferocity of the selloff in December which we put down to rising nervousness about the US-China trade dispute, an ill-judged and poorly communicated rate hike from the US Federal Reserve and an increasingly erratic pattern of behaviour from President Trump as the Mueller investigation into Russian collusion enters its final stages.
“The last couple of weeks have seen a surprise unilateral decision to pull all US troops out of Syria, threats of a “very long” government shutdown if Congress refuses to fund the Mexican border wall and a counterproductive attempt to blame the Fed for market weakness when it’s the trade war that investors are most worried about.“Elsewhere in the world Theresa May’s chaotic postponement of the meaningful vote on the EU Withdrawal Bill has added to the jittery mood in markets, raising as it does the risk of a No Deal Brexit that would damage both the UK and euro area economies.
But perhaps investors are too gloomy.
Over the weekend, Donald Trump and Xi Jinping both made positive noises about a breakthrough in their trade talks, offering hope that deeper tariffs can be avoided.
Just had a long and very good call with President Xi of China. Deal is moving along very well. If made, it will be very comprehensive, covering all subjects, areas and points of dispute. Big progress being made!
— Donald J. Trump (@realDonaldTrump) December 29, 2018
That is likely to give traders some much-needed optimism today. European markets are expected to open higher today, in a shortened trading session (although Germany and Italy will be closed).
#FTSE100 Index called to open +20pts at 6755 pic.twitter.com/Va9dkaekio
— Mike van Dulken (@Accendo_Mike) December 31, 2018
Updated
