Mark Jones and Rodrigo Campos
LONDON/NEW YORK (Reuters) – The first half of 2024 brought new winds to global markets, with the unstoppable rise of corporate giants, lazy central bank policy shifts, political turmoil and a return of M&A.
Predictions of a global interest-cutting frenzy may not have come to fruition, but Nvidia and the rest of the “Magnificent Seven” added another $3.6 trillion to their market capitalization.
MSCI’s global stock index of 47 countries has surged 11% since January, a good 11% gain, but still far short of the 30% surge in tech companies and the frankly staggering 150% gain from semiconductor giant Nvidia.
“30% of the S&P’s return this year has been driven by Nvidia alone,” said Chris Metcalfe, chief investment officer at IBOSS Asset Management, noting that Nvidia is now the most expensive stock in the world’s most expensive market.
The stock market is not the only market where milestones have been set.
In foreign exchange markets, the Japanese yen slumped to a 38-year low against the dollar. Cocoa rose to an all-time high, while French government bond risk surged to its highest since the euro crisis after President Emmanuel Macron, who suffered a crushing defeat to far-right forces in this month’s European Parliament elections, announced he would call snap general elections on Sunday.
Either way, government bonds have struggled, with only slight expectations of a sharp cut in interest rates in parts of Europe and emerging markets and no signs of one yet in the U.S.
As a result, those holding a basket of benchmark bonds lost roughly 1.5% of their assets.
“At the end of last year the market was expecting seven (U.S.) rate cuts and now they’re expecting one or two,” said Nadège Dufosse, head of multi-asset at Candriam. “That’s a big factor and explains the (poor) performance.”
US President Joe Biden’s shaky performance in the latest televised debate with Donald Trump has significantly increased uncertainty about November’s US presidential election.
The UK will also hold a general election on July 4th, but despite it being almost certain to result in the first change of government in 14 years, it is not expected to cause any major stir in the markets.
Georgina Hamilton, a fund manager at Polar Capital, explained that this is because, unlike France and the US, the two main candidates to lead the UK are fairly centrist.
“There has been a great deal of turmoil in recent years, but don’t underestimate the calm of the political backdrop,” she added.
Gold Shines
The big commodity story has been that the shortage has caused cocoa prices to soar by nearly 85%, already the second-biggest annual increase on record, but it’s not good news for chocolate lovers.
Gold hit an all-time high just shy of $2,450 an ounce last month, crude oil rose 12% and bitcoin topped $70,000 and continued to hit new highs after U.S. regulators gave the green light for bitcoin exchange-traded funds.
The value of global M&A activity increased 5% compared to last year.
That’s mainly due to $35 billion in deals such as credit card company Capital One’s purchase of Discover Financial and semiconductor design company Synopsys’ purchase of rival Ansys, but the figure could have been much higher if BHP’s $49 billion acquisition of Anglo American had gone through.
Impressive distressed finish
Among other surprises, Ecuador’s government bonds rose 46% despite lingering debt concerns, while Argentina’s chainsaw-wielding new President Javier Milley led the country’s government bonds to rise 32%.
Aberdeen emerging markets veteran Kevin Daly said sovereign bonds of failed countries including Zambia, Ghana and Sri Lanka have all risen by between 16 and 23 percent in a move that has signalled “an attempt to appear distressed” as years of debt restructuring near the end.
But as always, there is still plenty of sell-off to come in emerging markets.
Chinese property stocks have fallen for nine straight quarters, Nigerian and Egyptian currencies have fallen 42% and 36% respectively after devaluations, and Mexico’s peso has fallen nearly 8% this month as a landslide presidential election victory stoked fears about what will happen next.
(Additional reporting by Harry Robertson, Elizabeth Howcroft and Pasit Konknakonkul; Editing by Rod Nickel)
