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Chart of the Year: Big Moments for Gold Coins, Cryptocurrencies and the Dollar

For most investors, 2022 will be year to forgetFalling stock prices are bad enough, but bonds have also struggled with inflation spikes and aggressive central bank responses, with fund managers often having nowhere to hide.Few frivolous hedge funds can bet on dollars and government debt happy new year.

It has also been a year marked by truly extraordinary events, from stables like UK government bonds to wilds like cryptocurrencies. Here, the Financial Times reporter has picked his chart for the market this year, compiling the biggest moments and strongest trends.

A strange bond market

It’s been a dismal year for bond investors, with sharp inflation and rising interest rates globally.

The 16% drop in Bloomberg’s Global Aggregate Bond Index was the worst performance in data since 1991 and dwarfed other relatively rare annual declines in bonds over the past 30 years.

At the beginning of 2022, investors and central banks were still clinging to the notion that a relatively modest rise in interest rates could keep runaway inflation in check. But the shock to commodity prices triggered by Russia’s invasion of Ukraine has disappointed those expectations. Inflation continued its surprising rise for much of his year, even as central banks in the US, UK and Eurozone embarked on one of the most rapid tightening cycles in history.

The global bond benchmark 10-year US Treasury yield peaked above 4.3% in October. Yields have since fallen to 3.9%, following signs that U.S. inflation is slowing. But investors want more confirmation that price pressures are easing in the U.S. and elsewhere before signaling the end of brutal bond sales. Tommy Stubbington

Gilts gone wild

Even in a year of unprecedented bond market volatility, the UK stood out. When Liz Truss came up with a £45bn outstanding tax cut package in September during her 44-day premiership, The gold leaf market collapsed.

Line chart of UK 30 year heifer yield (%) showing the heifer roller coaster

Investors were unsettled not only by the size of the planned borrowing, but also by the decision to proceed without analysis from official budget watchdogs, in addition to the widely-anticipated hefty bill for household energy subsidies. was

Sow prices plummeted and yields soared. This has created a crisis in the UK pension sector. There, many so-called debt-driven funds were loaded into low-yielding leveraged his bets and urgently needed to meet margin demands. The market for UK government debt has entered a downward spiral of ‘self-reinforcing’ as they dumped long-term gold coins to raise needed cash, according to the Bank of England. The volatility in 30-year Treasury yields was greater that day than seen in most years.

With Truss stepping down and his successor Rishi Sunak abandoning tax cuts, Kham is truly back in the gold leaf market. This was widely seen as a victory for the so-called bond vigilantes, who chastise governments for exceeding the bounds of responsible fiscal policy. Tommy Stubbington

NatGas: Flamethrower

If there is one commodity that will tell the story of 2022, it is natural gas, and Europe has learned a rough lesson in energy geopolitics.

The EU, which depended on Russia for 40% of its gas before Vladimir Putin’s invasion of Ukraine, is desperate to replace supplies from Moscow and has dominated all other markets.

The squeeze on gas supplies by Russia began before the invasion. Because Russia was trying to soften Europe for what was to come. But that peak was reached this summer when exports of the main Nordstream 1 pipeline to Germany were curtailed.

EUR/MWh line chart shows European gas prices have pulled back after historic surge

By August, prices were over €300 per MWh, or $500 per barrel of oil equivalent, triggering a cost-of-living crisis, runaway inflation and even fears of economic collapse.

But the market worked. Europe stockpiled enough gas to start the winter and sucked up endless cargoes of liquefied natural gas while curbing demand. So far, no outright shortages have occurred. Prices remain impressively higher than normal, but have halved since August.

Now concerns have already shifted to next winter, with the big question of whether Europe will be able to replenish its stores while Russian supplies are almost completely cut off. David Shepard

Great Nickel Pickles from LME

Nickel is a run-of-the-mill commodity usually used in stainless steel, and although it has a compelling growth story of being used in electric vehicle batteries, it hit the headlines in March for all the wrong reasons. rice field.

Line chart of dollars per tonne showing a turbulent year for nickel in the LME

The metal has been trading at an average price of $15,000 per tonne for many years. But as fears of sanctions against Russia, a major nickel producer, increased, prices he soared 280% in a day to over $100,000 a tonne. Bet on price drop by Tsingshanis the world’s largest stainless steel company building a large-scale nickel project in Indonesia.

A historic price surge has caused the London Metal Exchange to suspend and cancel billions of dollars worth of trading, sparking one of the biggest crises in the stock exchange’s 145-year history. . I wondered why I didn’t do anything sooner.

The full extent of the crisis was later revealed in the LME’s defense to legal claims. The cash needed to trade would have driven clearing members into bankruptcy, further aggravating the LME clearing house. to default There was even danger of contagion throughout the financial markets.

Since the trauma, traders have stopped using nickel’s LME contracts, which serve as a global benchmark for producers and sellers to trade. thin liquidity Back to volatile price movements.

The turmoil in the nickel market is not over yet. The LME cannot find a quick solution to restore confidence in the contract and its damaged reputation. Harry Dempsey

when the cipher is cracked

The cryptocurrency industry is suffering from its own “Lehman Moment” of falling asset prices, failed daisy chain Overly leveraged and often poorly managed market intermediaries. The biggest of them all, of course, is the defunct FTX, which founder Sam Bankman-Fried feels right now. Full power of criminal and civil litigation It could cost him a century in prison. While the foundations of this crisis were laid at the birth of cryptocurrency, the meltdown was sparked by him in May.

That was when the currently running Terraform Labs brainchild of founder Do Kwon, the terra crypto token implode. So-called “stablecoins” were supposed to hold a solid $1 apiece valuation under a scheme backed by algorithms and blind faith.However, in May, the value collapse to zero And we’ve pulled down much of the crypto space, starting with our sister token, Luna.

Line chart of $ per coin showing Terra's corresponding luna collapse

A condensed history of what happened next includes the bankruptcy of cryptocurrency hedge fund Three Arrows Capital. went into liquidation In June; Celsius Network (catchphrase: “debank yourself”), filing for bankruptcy in July; and, ironically, many other brokers bailed out by Bankman-Fried at the time. Scott Cipollina

king dollar year

In a tumultuous year for the market, one constant was the US dollar, which hit a 20-year high in September compared to a basket of six other major currencies. This is a 26% increase from May 2021.

The dollar has brought waste to many other currencies, including the euro. sunk in parity Against the dollar and pound in July, fell to an all-time low After September’s disastrous ‘mini’ budget.China’s yuan Lowest score since 2007Japan breaks tradition, greatly intervened in the appreciation of the yen — it has spent years pushing down, not pushing up.

The dollar’s support comes as investors seek a haven to store their cash as rising inflation and Russia’s invasion of Ukraine hurt global financial markets.

Now US inflation appears to be falling and so is the dollar. Société Générale macro strategist Kit Jacks said slowing U.S. economic growth and heightened expectations that the so-called Federal Reserve would “pivot” to slow rate hikes and even cut them in 2023 “ It’s a recipe for a weaker dollar,” he said.

A line chart of the US dollar index has fallen 8% since late September and shows the dollar measured against a basket of six peers.

Others are not so sure. The US dollar may have peaked, they argue, but that doesn’t mean it will continue to fall next year.

Chris Turner, Head of Global Markets at ING, said: George Steer

How the ruble got out of trouble

The Russian ruble has been the child of an unlikely resurgence this year. It is stronger against the dollar today than it was before Russia launched its invasion of Ukraine, rebounding after falling sharply in the first few weeks of March.

After Russia’s central bank more than doubled interest rates to 20% in late February to calm the country’s financial markets, the currency initially weakened following the outbreak of war, falling to 1 in days to weeks. It fell to about 130 against the dollar.

Ruble line chart more than reversed losses against the dollar showing a V-shaped recovery for the ruble.

But its revival does not reflect the wave of investments in Russia. Instead, Putin’s imposition of strict capital controls and blocking foreign traders seeking to withdraw from investments allowed the ruble to recover those losses by his April.

Another spell of ruble depreciation occurred at the end of the year, with the ruble at $1 to $72. George Steer

https://www.ft.com/content/3d362b12-8510-4e90-8189-d1f46ef771dc Chart of the Year: Big Moments for Gold Coins, Cryptocurrencies and the Dollar

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