* Falls in emerging markets and Europe halts global stocks
rally
* Hong Kong's Hang Seng has worst quarter in 4 years amid
protests
* Fifth quarterly fall for yuan in the last six
* Oil cools after red hot start the year
* Dollar climbs over 3.3% in best run since Q2 2018
* World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Marc Jones
LONDON, Sept 30 (Reuters) - It has been a pivotal few months
for financial markets. China and Europe have halted the global
stocks rally, oil has cooled dramatically and rising recession
worries have sent gold and government bonds charging again.
Perhaps it was to be expected after such a flying start to
the year, but the deterioration in risk appetite has included
some eye-catching milestones.
The switch back into support mode by the top global central
banks has swollen the amount of bonds trading at negative rates
-- where investors pay rather than get paid to lend -- to a
record $17 trillion. Over 3.5% returns on U.S. Treasuries following the first
Federal Reserve rate cuts since the financial crisis mean they
are now having their best year since 2011 while calmer politics
and ECB stimulus have given Italian bond markets their best
quarter since Mario Draghi's 2012 "whatever it takes" vow.
"The shear size of the (bond) rally was quite impressive,"
said Hans Peterson, global head of asset allocation at SEB
Investment Management. "And quite surprising," he added
considering how low bond yields were already.
There has been much more divergence in equity and foreign
exchange markets.
On one hand, Wall Street's S&P 500 has added another 1% to
its 19% H1 surge .SPX , Japan's Nikkei is up 2.4% .N225 and
Turkey's battered stock market has bounced back almost 12% after
torrid last 18 months. .XU100
In the drop zone though, Hong Kong's protests saw the Hang
Seng .HKI lose 9% in its worst quarter in four years and
plenty of emerging markets from South Africa to Saudi Arabia
have buckled badly too.
MSCI's all country world index .MIWD00000PUS , which now
tracks around 2,700 stocks in 49 countries is set for its first
quarterly dip of the year but a near 2% rebound this month has
limited the damage to a modest 0.5%.
A weaker yuan CNH= means China's big bourses are down as
well in dollar terms despite Beijing's stimulus efforts in the
face of the trade war. But then again so too are London .FTSE ,
Frankfurt .GDAXI and Paris .FCHI in Europe.
The dollar is up over 3% against a basket of top global
currencies but sterling's additional Brexit worries mean it is
down a bit more and the euro is more than 4% lower after the
ECB's cut its interest into even more negative territory.
DOLLAR CHARGE
It's been the worst quarter for the Australian dollar,
meanwhile, since the end of 2016 as its China-sensitive economy
has spluttered while 6.5% has been lopped off its Antipodean
cousin, the New Zealand dollar NZD=D4 AUD=D4 .
"The U.S. dollar has been very strong really against
everything," explained head of currencies at State Street Global
Advisors, James Binny, citing global factors like the trade war.
"It is getting to the point where it is quite expensive. As
with anything it is difficult to pick the turning point, but
it's like a stretched rubber band -- the more you stretch it the
stronger the forces that bring it back."
Among commodities there has been a big split too, but there
it has been between what's precious and what's not.
Safe-haven gold is up 4.5% XAU= and is now on its longest
quarterly winning streak since 2011 having been rising since Q4
2018. Equally precious palladium XPD= meanwhile is up for a
sixth straight quarter - its best run since 2000.
Industrial bellwether and China proxy copper MCU3=LX is at
the other end of the spectrum. The red metal is down for a sixth
quarter in the last seven. It has been black for oil too - it is
down over 8% though that is after a 25% surge in the first half
of the year.
In cyberspace Bitcoin is down 22% which might sound
calamitous. But it was up 220% in H1.
What is perhaps more telling for the overall picture is that
FANG stocks, which have been one of the big driving forces for
equity markets in recent years, have struggled to make more than
1% this quarter as a set.
Facebook FB.O and Amazon AMZN.O are both down over 8%,
Apple AAPL.O and Google GOOGL.O are both up over 10%, but
streaming giant Netflix NFLX.O is down a hefty 27% having been
up 38% for the year going into Q3.
"The trend driver right now is the U.S.-China situation.
That holds the levels and the direction for currencies now,"
said SEB's Peterson. "The tipping point will be if we get some
real progress there."
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Global markets third quarter and year-to-date https://tmsnrt.rs/2owviEI
Global FX markets in 2019 https://tmsnrt.rs/2n2RPZf
Emerging market stocks suffer in Q3 https://tmsnrt.rs/2nO2185
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