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How 2022 shocked, rocked and rolled global markets

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  • World stocks down 20% in worst year since financial crisis.
  • Wild swings in commodity and FX due to rate rises and war.
  • Crypto crashes and defaults have added to volatility.

LONDON: Trillions of dollars wiped off world stocks, bond market tantrums, whip-sawing currency and commodities and the collapse of a few crypto empires — 2022 has been perhaps the most turbulent year investors have ever seen, and for good reason.

Tallying the final numbers is useful but doesn’t even come close to telling the whole story.

Yes, global equities are down $14 trillion and heading for their second worst year on record, but there have been nearly 300 interest rate hikes and a trio of 10%-plus rallies in that time making the volatility freakish.

The main drivers have been the war in Ukraine, combined with rampant inflation as global economies broke out of the pandemic, but China remained shackled by it.

US Treasuries and German bonds, the benchmarks of global borrowing markets and traditional go-to assets in troubled times, lost 16% and 24% respectively in dollar terms.

DoubleLine Capital’s Jeffery Gundlach, dubbed the ‘Bond King’ in the markets, says conditions got so ugly at points that his team found it almost impossible to trade for days at a time.

“There has been a buyer’s strike,” he said. “And understandably so because prices have just been going down until recently.”

How 2022 shocked, rocked and rolled global markets

Drama kicked in as soon as it became clear that COVID was not going to shutter the global economy again and the world’s most influential central bank, the US Federal Reserve, was serious about raising interest rates.

Ten-year Treasury yields jumped to 1.8% from less than 1.5%, knocking 5% off MSCI’s world stocks index in January alone.

That yield is now at 3.68%, stocks are down 20% while oil prices surged 80% before giving it all up. The Fed has delivered 400bps of hikes and the European Central Bank a record 250bps, despite saying this time last year it was unlikely to budge.

The dollar this week gave the yen a lift.

In emerging markets, Turkey’s inflation and monetary policy problems have cost the lira another 28%, but its stock market is the best performer in the world.

Hard-pressed Egypt devalued its currency more than 36%. Ghana’s cedi crashed 60% as it has joined Sri Lanka in default. Despite being well down from its June highs, Russia’s rouble is still the world’s second-best performing currency supported by Moscow’s capital controls. It was initially smashed after the invasion of Ukraine.

How 2022 shocked, rocked and rolled global markets

“If you ask me what will happen next year I really couldn’t tell you,” said Close Brothers Asset Management’s Chief Investment Officer Robert Alster, who, like many, also pointed to the pummeling the pound and British bond markets took when the short-lived government of Liz Truss flirted with an unfunded spending splurge.

Ten-year gilt yields soared over 100 bps and the pound lost 9% in a matter of days — moves the scale of which are rare in major markets.

“If you sell it wrong, don’t be surprised if it goes down like a cup of cold sick,” said veteran CMC Markets’ analyst Michael Hewson.

Tech problems

The surge in rates has also taken $3.6 trillion off the tech titans. Facebook and Tesla have both hemorrhaged more than 60% while Alphabet’s Google and Amazon are respectively down 40% and 50%.

Chinese stocks have staged a late rally thanks to signs that its zero-COVID policy’s days are numbered but they are still down 25% and emerging market ‘hard currency’ government debt will notch its first ever back-to-back loss.

How 2022 shocked, rocked and rolled global markets

Initial public offerings and bond sales have also slumped almost everywhere apart from the Middle East, while commodities have been the best-performing asset class for a second consecutive year.

Natural gas’ more than 50% rise is the best overall in that group, albeit largely due to the war in Ukraine which had hoisted prices 140% at one point.

Mounting recession worries along with the West’s plan to stop buying Russian oil mean Brent has given back the entire 80% it made in the first quarter, as have wheat and corn.

How 2022 shocked, rocked and rolled global markets

The cryptomarket has been even more chaotic. Bitcoin ends 2022 robbed of its cocktail of cheap money and leveraged bets.

The pre-eminent cryptocurrency has lost 60% of its value, while the wider crypto market has shrunk by $1.4 trillion, squashed by the collapse of Sam Bankman-Fried’s FTX empire, Celsius and supposed ‘stablecoins’ terraUSD and Luna.

“What has gone in global markets this year has been traumatic,” said EFG Bank Chief Economist and ex-Deputy Governor of Ireland’s central bank, Stefan Gerlach.

“But if central banks hadn’t underestimated the rise in inflation so dramatically and had to jack up interest rates, it wouldn’t have been so catastrophic”.

How 2022 shocked, rocked and rolled global markets

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In interbank trade, the Pakistani rupee beats the US dollar.

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In the international exchange market, the US dollar has continued to weaken in relation to the Pakistani rupee.

The dollar fell to Rs278.10 from Rs278.17 at the beginning of interbank trading, according to currency dealers, a seven paisa loss.

In the meantime, there was a lot of turbulence in the stock market, but it recovered and moved into the positive zone. The KSE-100 index recovered momentum and reached 116,000 points after soaring 1,300 points.

Both currency and stock market swings, according to analysts, are a reflection of ongoing market adjustments and economic uncertainty.

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Phase II of CPEC: China-Pakistan Partnership Enters a New Era

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The cornerstone of economic cooperation between the two brothers and all-weather friends is still the China-Pakistan Economic Corridor, the initiative’s flagship project.

In contrast to reports of a slowdown, recent events indicate a renewed vigour and strategic emphasis on pushing the second phase of CPEC, known as CPEC Phase-2, according to the Ministry of Planning, Development, and Special Initiatives.

According to the statement, this crucial stage seeks to reshape the foundation of bilateral ties via increased cooperation, cutting-edge technology transfer, and revolutionary socioeconomic initiatives.

Planning Minister Ahsan Iqbal is leading Pakistan’s participation in a number of high-profile gatherings in China, such as the 3rd Forum on China-Indian Ocean Region Development Cooperation in Kunming and the High-Level Seminar on CPEC-2 in Beijing.

His involvement demonstrates Pakistan’s commitment to reviving CPEC, resolving outstanding concerns, and developing a strong phase-2 roadmap that considers both countries’ long-term prosperity.

At the core of these interactions is China’s steadfast determination to turn CPEC into a strategic alliance that promotes development, progress, and connectivity.

Instead of being marginalised, CPEC is developing into a multifaceted framework with five main thematic corridors: the Opening-Up/Regional Connectivity Corridor, the Innovation Corridor, the Green Corridor, the Growth Corridor, and the Livelihood-Enhancing Corridor.

With the help of projects like these, the two countries will fortify their partnership, and CPEC phase-2 will become a model of global economic integration and collaboration that benefits not just China and Pakistan but the entire region.

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The inflation rate in Pakistan dropped to its lowest level.

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On December 2, core inflation as determined by the Consumer Price Index (CPI) significantly slowed, falling to 4.9% in November 2024 from 7.2 percent in October 2024.

The CPI-based inflation rate for the same month last year (November 2023) was 29.2%, according to PBS data.

Compared to a 1.2% gain in the prior month, it increased by 0.5% month over month in November 2024.

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