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The three months that rattled global financial markets

How much destruction has the COVID-19 pandemic and the oil price war inflicted on the world financial markets this year?

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Global market: Week of the bears, Bulls gain momentum, as stimulus package lifts global financial markets, Three months that rattled global financial markets, Zenith, GTBank pull the brakes on momentum at the Nigerian stock market

How much destruction has the COVID-19 pandemic and the oil price war inflicted on the world financial markets this year? it has probably been the most destructive sell-off this century

The figures have been alarming. About $15 trillion has been wiped off world stock markets, as crude oil has slumped 60% as Saudi Arabia and Russia have started a price war and emerging markets like Brazil, Mexico and South Africa have seen their currencies plummet over 20%.

Volatility and corporate debt market stress have spiked on worries that whole sectors could go bust, airlines around the world have had half their market capitalisation vaporized while cratering economies risk a new wave of government debt crises.

That carnage has seen 22% and 24% slumps for Wall Street’s Dow Jones DJI and S&P 500 SPX, almost 25% for MSCI 49-country world index 27% for London’s internationally exposed FTSE.

[READ MORE: Bulls gain momentum, as stimulus package lifts global financial markets)

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For the record, quarterly drop for Wall Street was 40% in 1932 in the midst of the Great Depression. The fact that the S&P and Dow were at record highs back in mid-February has made the crash this time seem more brutal.

22nd Century portfolio, Weekly update of the Global Market ending 13th March 2020

Stocks in China, where the virus hit first, have fared relatively well in comparison with only an 11% drop in dollar terms but the impact on other major emerging markets has been devastating as their main commodity markets, and currencies, have also collapsed.

Russian stocks, which topped the tables last year, have been routed 40% in dollar terms. South Africa, which was stripped of its last investment-grade credit rating on Friday, has fallen by the same percentage, though Brazil has been the worst, plunging 50%.

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A large part of that is down to some wild currency market moves. All three of those countries have seen their currencies lose over 20% this year, which also ties into the commodity market carnage.

[READ ALSO: COVID-19, a virus that shakes global financial markets)

Brent crude oil has fallen by 62% in the quarter to just $25 a barrel. This was not only because of the coronavirus crisis, but also the price war between Saudi Arabia and Russia, which is putting their public finances at risk.

Industrial metals like copper aluminium and steel have all dropped 15-22% and some agricultural staples like coffee and sugar are down 17% and 10%.

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Stanbic IBTC

Olumide Adesina is a France-born Nigerian. He is a Certified Investment Trader, with more than 15 years of working expertise in Investment trading. Follow Olumide on Twitter @tokunboadesina or email [email protected] He is a Member of the Chartered Financial Analyst Society.

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Coronavirus

Combined Vaccine Manufacturing capacity to hit 6.8 billion doses in 2021

COVID-19 vaccine manufacturing capacity is expected to hit 6.8 billion doses in 2021.

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Covid-19: First world nations oppose waiving intellectual rights for vaccine development

Meristem Group disclosed that the combined effort in manufacturing COVID-19 vaccines for global use is expected to yield about 6.8 billion doses in 2021.

This was revealed in the Annual Outlook 2021 report presented by Meristem Group, titled Bracing for a different future.”

According to the report, the existing manufacturing capacity will only be sufficient enough to immunize about 44% of the global population, which would create obvious vaccination gap and make the pandemic last longer than necessary.

The report states,

  • The cold temperature requirements for vaccine storage pose major logistics concern particularly in Sub-Saharan Africa and other low-income countries. WHO estimates that about 50% of vaccines are wasted every year, largely due to a lack of temperature control.”

According to the report, the estimated 6.8billion doses are expected to be collaboratively manufactured as follows:  CanSino – 0.2billion, AstraZeneca – 3.0 billion, Gamaleya – 0.3billion, Moderna – 0.4billion, Pfizer-BioNtech – 1.3billion, SinoPharm – 1billion, and SinoVac – 0.6billion.

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What you should know

  • The global population as of 2020 is 7.8billion and 70% is required to achieve herd immunity (otherwise called herd protection)
  • Herd Immunity or herd protection is achieved when you have most of the population immunized against an infectious disease.
  • 2 doses of the vaccines are required for each person for immunity.
  • It is expected that between 11 and 15 billion doses would be required to achieve the desired herd immunity, globally.
  • From all indications, herd immunity may not be achieved until mid or late 2022, with the subsisting 100% vaccine production capacity utilization in 2021 – with neither production nor distribution losses.
  • To achieve regulatory approval, a vaccine must undergo a three-stage clinical development process after the exploratory and pre-clinical stages and the U.S Food and Drug Administration (FDA) sets a phase 3 efficacy benchmark of 50%.

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Coronavirus

Covid-19: Global deaths surpass 2 million

Global casualty record for the Covid-19 pandemic surpassed 2 million deaths on Friday.

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Nigeria blows past 40,000 COVID-19 cases

The Global casualty record for the Covid-19 pandemic surpassed 2 million deaths on Friday, with the United States accounting for 1 in every 5 deaths, as it has recorded over 386,000 casualties so far.

This was disclosed in a report by Reuters in its Covid-19 tally reported on Friday evening.

After the United States, Brazil, Mexico, India and the U.K contribute nearly 50% of the combined casualties.

The report also disclosed that an average of 11,900 casualties are recorded per day in year 2021, despite the fact that it took 9 months for the world to record 1 million casualties.

United Nations Secretary-General, Antonio Guterres, said the 2 million death count was “a heart-wrenching milestone.”

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  • “Behind this staggering number are names and faces: the smile now only a memory, the seat forever empty at the dinner table, the room that echoes with the silence of a loved one,” he added.

The WHO warned that 2021 could be tougher due to the nature of new variants which transmit the disease faster.

  • “We are going into a second year of this. It could even be tougher given the transmission dynamics and some of the issues that we are seeing,” WHO Chief, Mike Ryan, said.

Analysts expect the global death toll to surpass 3 million by April 2021.

What you should know 

  • Nairametrics reported that the total number of covid-19 cases in Nigeria had surpassed the 100,000 mark on Sunday 10th January 2021, according to the Nigeria Centre for Disease Control.
  • The African Union stated that it secured 270 million Covid-19 vaccine doses for the continent from drug manufacturers to supplement the COVAX programme, a step towards the commencement of the complex task of vaccinating over 1.2 billion people with limited financial resources.
  • The Nigeria Centre for Disease Control on Friday 15th January 2021, announced that 1,867 new cases of the covid-19 virus were recorded across 24 states in the country. This represents the highest number of cases recorded in a single day.

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Debt Securities

Interest rates will remain low until the end of H1 2021 – Meristem Securities

Meristem Securities has argued that interest rates will remain low until, at least, the end of H1 2021.

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Why Emefiele’s interest rate policy is ‘great’

Meristem Securities has asserted that interest rates will remain low until, at least, the end of H1 2021.

This statement was made at the recently held webinar on Global Economy and Outlook, which the company themed: Bracing for a Different Future.

Although the company acknowledged that there is mounting pressure for upward movement in yields from several stakeholders, it appears the company concurs nothing concrete is in sight.

This line of reasoning seems to have influenced their decision to advise investors to move away from Treasury instruments.

What they are saying

Meristem advises that:

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  • “Buy and hold strategy investors seeking to generate above average returns should move away from risk free Treasury instruments and focus on investment grade commercial papers and bonds which satisfy investment objectives.”
  • “Active traders with higher risk appetite are advised to focus on high-yield short duration instruments, which would be re-invested into a higher yield environment should rate reversals occur.”

The advice regarding shunning Treasury instruments appears to be in order, considering that treasury bill rate has been declining, with the latest figure — November 2020 — 0.03% as per the CBN monthly interest rate data.

Further checks from the Debt Management Office website, indicates that the latest figures for Eurobonds and Diaspora bond fall short of the fixed yield at issue for all the different categories of bonds in issue.

What you should know

Latest figures from the CBN’s monthly interest rate indicate that:

  • Treasury bill rate has been on a steady decline for six months, down to 0.03% since the last rise (2.47%) in May 2020.
  • Fixed deposit rates (one, three, six and twelve months) have also been declining – the latest figures for these indicate that in November 2020, one-month deposit rate was 1.92%, 2.9% for three months, 2.84% for six months, and 4.89% for 12 months.
  • Compared with the corresponding period in 2019, the figures indicate that these rates fell by 75%, 66%, 71% and 49% respectively.

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