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Global markets experienced another turbulent month in April, as investors contended with a slew of headwinds, from the Federal Reserve’s monetary tightening, rising rates, persistent inflation, Covid case spikes in China and the ongoing war in Ukraine. U.S equities had another tough month. Consumer staples (+2.6%) fared best while technology (-11.3%), financials (-9.9%) and communication services (-15.6%) sectors sold off following earnings that missed expectations and an increase in risk-off sentiment. Globally, growth stocks saw substantial losses of -11.9% (MSCI World Growth) while value managed a -4.9% (MSCI World Value) decline. Fixed income also had a difficult month, with global bonds delivering -5.5% (Global Agg: Barclays Global Aggregate) in April.
Major central banks reinforced their hawkish tone over the month, even while some economic data prints showed signs of slowing growth. Markets are now pricing in interest rates of over 2% in both the UK and U.S. by year-end, while eurozone rates are projected to turn positive as early as October.
In the U.S., the Federal Reserve signalled it will reduce its massive bond holdings at a maximum pace of $95 billion a month going froward. In addition, Fed Chair Powell suggested that front loading the rate hikes may be required to combat sticky inflation after U.S. inflation rose 8.5% in March. The market is now pricing in a 50 basis point hike for the next three meetings in May, June and July.
The biggest data surprise of the month, came from the U.S. Commerce Department, showing that the U.S. economy contracted at annualised rate of 1.4% in Q1 (vs +1.1% exp.) compared to +6.9% in the previous quarter. The sharp deceleration was due to weaker exports and a decline in inventory spending following a sizable increase in Q4 2021.
The eurozone economy expanded by 0.2% in the first quarter, as surging commodity prices and disruptions related to Russia’s invasion of Ukraine weighed on growth. Gas prices in the region cooled a little on the month but still stand 42% higher year-to-date. Meanwhile, the European Central Bank reiterated during the month that it would end its asset purchase program in the third quarter, while President Christine Lagarde stated that “there is a high chance rates will be increased this year.”
In other news, Emmanuel Macron was re-elected for a second five-year term as French president, defeating Marine Le Pen in a repeat of the 2017 run-off.
China remained front of mind in April as concerns over the country’s Covid-19 resurgence weighed on investor sentiment. Economists have cut China’s 2022 growth outlook (measured by Gross Domestic Product) from 5% to 4.9% due to the lockdowns’ negative impact on the economy. However, China’s central bank pledged to increase support for the economy, seeking to reassure investors. China’s State Council also pledged to promote the growth of internet platform firms.
In South Africa (SA), Cyril Ramaphosa announced the end to the state of disaster declared more than two years ago to manage the coronavirus pandemic. On the economic front, South Africa’s trade surplus widened to R45.9bn in March of 2022 – the highest since June 2021 and well above market expectations. SA’s headline inflation rose slightly less than expected to 5.9% (Cons: 6.0%) in March, up from 5.7% in February and just below the Reserve Bank’s upper limit of 6%.
|SA MARKETS||LAST PRICE||APR 2022 MOVES||YTD PERFORMANCE|
|JSE ALL-SHARE||72 438||-4,05%||-1,72%|
|RESOURCE 10||77 198||-5,39%||8,77%|
|INDUSTRIAL 25||80 199||-1,97%||-15,98%|
|FINANCIAL 15||16 309||-7,80%||10,21%|
|SA LISTED PROPERTY||1 639||-1,41%||-2,66%|
|GLOBAL MARKETS||LAST PRICE||APR 2022 MOVES||YTD PERFORMANCE|
|DOW JONES||33 062||-4,66%||-9,02%|
|S&P 500||4 155||-8,28%||-12,81%|
|EURO STOXX 50||3 732||-4,36%||-13,17%|
|FTSE 100||7 545||0,38%||2,17%|
|NIKKEI 225||26 819||-3,60%||-6,85%|
|10 YEAR YIELDS||YIELD||1 MONTH YIELD CHANGE||YTD YIELD CHANGE|
|UNITED STATES 10Y||2,98%||0,63%||1,47%|
|UNITED KINGDOM 10Y||1,90%||0,29%||0,93%|
|SOUTH AFRICAN 10Y||9,95%||0,35%||0,62%|
|CURRENCIES||LAST PRICE||APR 2022 MOVES||YTD MOVE|
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