Global stock markets surge in 2013 as confidence returns

Stock markets around the advanced world rebounded in 2013, despite outbreaks of investor nerves over the tapering of the US Federal Reserve’s monetary stimulus programme.

American equity markets registered their strongest year since 1997, with the S&P 500 finishing the year 30 per cent higher than it was 12 months earlier. European stock markets also experienced their strongest annual performance since 2009, as fears of a eurozone breakup abated and the single currency area finally emerged from recession.

The strongest performer of the large eurozone economy stock market indexes was Germany’s Dax, which rose 23 per cent on the year. Despite France’s relative economic malaise, the CAC index rose a respectable 18 per cent. Spain’s IBEX put on 21 per cent and Italy’s MIB rose 12 per cent in 2013. The Greek stock market rebounded by an impressive  24 per cent over the 12 months, although it remains 45 per  cent lower than its peak in October 2008.

In Asia, Japan’s Nikkei index was the standout performer of 2013. It jumped 52 per cent over 12 months, with investors fired up by Prime Minister Shinzo Abe’s overhaul of monetary and fiscal policy designed to pull the world’s third largest economy out of its two-decade-long deflationary stagnation.

However, the performance of emerging market economies was more mixed. The Indian stock exchange recovered from its plunge in the summer brought on by rumours of the Fed’s taper of its asset purchases, which has been supporting equities in the developing world. Mumbai’s BSE Index finished the year up 9 per cent.

But the Brazilian stock  market endured a torrid 2013, losing 18 per cent over the year. The Indonesian stock market also stagnated, ending just 2 per cent higher than it began. MSCI’s emerging market index fell by 5 per cent in 2013.

The flipside of the recovery of equity markets in developed countries was a fall in demand for perceived safe assets. Gold registered its largest annual decline in 30 years in 2013, with the spot price falling by 28 per cent over the 12 months to $1,190 per ounce. Investors in gold suffered their first annual loss since the Millennium. Meanwhile, the price of silver fell 36 per cent, its worst annual performance since 1982.

The prices of American and British sovereign bonds also fell back as sentiment turned bullish. The yield on 10-year gilts rose above 3 per cent, up from 1.8 in January. 10-year Treasury bonds finished the year yielding just shy of 3 per cent, up from 1.75 per cent at the beginning of the year.

On currency markets, sterling ended the year strongly against the US dollar at $1.65, up from $1.62 in January. The US currency also rose strongly against the Japanese yen thanks to Tokyo’s loosening programme, with a dollar ending the year worth 105 yen, up from 86 yen 12 months earlier. The euro ended 2013 at its strongest level against the dollar in two years at $1.38.