GO
Loading...

Germany thrashes Brazil in markets, too

A Brazil fan looks dejected following the 2014 FIFA World Cup Brazil Semi Final match between Brazil and Germany.
Chris Brunskill | Getty Images
A Brazil fan looks dejected following the 2014 FIFA World Cup Brazil Semi Final match between Brazil and Germany.

Brazil suffered a crushing 7-1 defeat to Germany in the World Cup semi-final on Tuesday, but the Germans haven't only been thrashing the Brazilians on the football pitch.

As highlighted by IG's chief market strategist Chris Weston, Germany's equity, currency and government bond markets have long been trumping the beleaguered Latin American country, which now has a World Cup defeat to contend with on top of its economic woes.

"If sizeable outperformance on the football field wasn't enough, you could also look at Germany's financial markets relative to that of Brazil," said Weston.

Read MoreBrazil gets crushed, Internet watches in horror

SOURCE: IG

Weston illustrated this trend by dividing the Bovespa's daily close over the past five years by the Dax's daily close. A higher number therefore reflected stronger performance for Brazilian stocks and a lower number illustrates German stock market strength.

"Since 2010, the ratio of the Brazilian Bovespa to that of the DAX has fallen from 12 times to now stand at 5.4 times," he added.

Also, just comparing performances between both markets over the last five years is telling enough, Weston said. The Dax has risen 79 percent in the period, while the Bovespa declined 5 percent.

Read MoreIndonesia, Brazil markets to catch election fever?

SOURCE: IG

On the currency front, Germany's euro currency has vastly outperformed the Brazilian real as well.

"Euro-real has come off a touch of late, but is still up 40 percent from the 2010 low," said Weston.

The real may have seen renewed strength in recent months after the Brazilian central bank took steps to shore up losses following the heavy selloff in the emerging market rout earlier this year, but the currency still is still down 11 percent against the U.S. dollar over the past five years.

Read MoreEven if Brazil wins World Cup, it loses: Bankers

SOURCE: IG

Meanwhile, comparing the performances of the German and Brazilian government bond market also offers striking disparity.

German 10-year government bond yields have seen a dramatic fall to 1.21 percent from 1.91 percent over the past six months, as geopolitical tensions in Iraq and Ukraine fueled demand for safe haven assets.

By contrast, Brazilian government bonds are yielding over 12 percent. Brazil's economic growth plummeted to 2.3 percent in 2013, down from 7.5 percent in 2010.

Lower yields reflect higher prices and investor demand in the fixed income market.

Read MoreWorld Cup overpass project collapses in Brazil

On a side note, high profile investment banks who predicted outcomes for the World Cup and missed by a wide margin might have done better had they used market performance as a guide. Goldman Sachs and Standard Chartered would be hanging their heads in shame today; both forecast a Brazil win.

Symbol
Price
 
Change
%Change
STAN
---
GS
---
BOVESPA
---
.GDAX
---
USD/BRL
---
EURBRL=
---
EURBA=
---

Featured

Contact Markets

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More