Markets' New Year resolve proves weak

published 7 January 2016

Talk about a New Year hangover. By mid-week, the MSCI World index tracking both developed and emerging markets had lost 2.5% and hit a three-month low. Monday saw several markets suffer their worst first trading day in years; the pan-European DJ Stoxx 600 index had its worst on record.

Brent crude futures have slumped to under $35 a barrel, a 12-year low. Emerging-market stocks fell to a new post-crisis low and emerging-market currencies followed. North Korea's claim to have tested a hydrogen bomb unsettled investors already worried about mounting tension between Iran and Saudi Arabia.

What the commentators said

China's weakness has dragged down commodities too, which means that "the turn of the calendar will not alleviate pressure" on raw materials exporters and emerging markets in general, said Brown Brothers Harriman. It hardly helps that investors have been turning their back on the sector in anticipation of higher interest rates in America, which always make riskier assets less appealing.

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Meanwhile, oil's initial uptick amid the Iran/Saudi row has rapidly dissipated as the focus returns to the huge glut in the oil market. The market is interpreting the tension as bearish "as it means [there] is even less chance of an Opec agreement", said PVM's Tamas Varga. Absent an Opec consensus to stop pumping at full throttle, Saudi is not going to cut back and thus help Iran gain market share.

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.