Gold, bonds and Brazil shine brightest in stormy quarter

By Marc Jones and Vincent Flasseur

LONDON (Reuters) - Gold, government bonds and assets in Brazil have been the standout winners during a stormy start to the year that has battered the dollar, the pound and Japanese and Chinese stocks.

As this graphic shows - http://reut.rs/1Rx8jLT - the headline moves are stark but somewhat underplay a wild V-shaped ride for global markets that has tested even the most experienced of investors.

The dollar, the keystone for many, has fallen nearly 4 percent since the start of the year against other big currencies, its biggest quarterly fall in five years as the Federal Reserve has cooled talk of multiple interest rate hikes.

At the same time January's slump in commodity prices which then ripped into both developed and developing markets set safe-haven gold on 16 percent tear, which is its best start to a year in three decades. [GOL/]

The early weeks' rout in riskier assets left MSCI's All World index <..MIWD00000PUS> down 14 percent by the time it bottomed on January 20, while oil (LCOc1) lost almost 40 percent which triggered a wave of sovereign rating and bankruptcy fears.

"The slide in oil prices created some serious concerns about the credit quality of the high yield bond and energy sector and that started to transfer to other sectors," said SEB Investment Management's global head of asset allocation, Hans Peterson.

"Secondly you had a serious concern about China's ambition to keep its currency, the remnimbi, stable and that was the combination that drove the market down."

But fast-forward 2-1/2 months and oil is almost back to where it started the year and emerging market stocks (MSCIEF) are up 20 percent from their lows, led by Brazil, a country that may impeach its president.

It has come as the big oil-producing countries have talked about output cuts, the Fed has cooled rate hike talk and China, Japan and the euro zone have all thrown fresh stimulus at their economies.

Volatile EM currencies from the Brazilian real to the Russian rouble have surged against the dollar too, along with the traditionally more solid yen and euro .

Local currency EM debt - http://reut.rs/1ZKAaO6 - and certain industrial metals have been red-hot too. EM bonds are up 10 percent, copper is up 2.5 percent, while tin and zinc CMZN3 have soared 15 and 10 percent respectively.

LATIN SURGES

Big stocks gains in Peru (25 percent) and Colombia (17 percent) along with those in Brazil and big rallies in Brazilian and Argentine debt made atin America the best region globally just ahead of eastern Europe.

However, it has by no means been a traditional 'risk' rally.

Aside from the surge in gold, two increases in the ECB's money printing program have given equally risk-averse haven German government bonds , their best quarter since the height of the euro zone crisis in late 2011.

U.S. Treasuries (US10YT=RR) too have made a respectable 4 percent as the Fed has dampened rate hike bets, all of which has helped bonds worldwide get off to their best start to a year since at least 1996 according to a Bank of America Merrill Lynch (NYSE:BAC).

At the other end of the spectrum, China's stock markets <.SSEC> (CSI300), are still down roughly 15 percent year-to-date despite Beijing's flurry of support measures this year.

The pound has been hit by concerns about a potential exit or 'Brexit' from the European Union and Tokyo's Nikkei (N225) has been walloped 11 percent, albeit a more modest 5 percent in dollar terms thanks to the yen's best quarter since 2009.

(Graphics by Vincent Flasseur)