N.B. All performance details are in GBP terms unless otherwise stated.
LSEG Data & Analytics, 01 May 2024
Market insights
4 min read
Global Market Review – April 2024
In contrast to previous months, April was a challenging period for many developed equity and fixed income markets, as economic data hinted at inflation remaining stubborn and confidence waned in the number of interest rate cuts predicted for this year.
The two leading equity markets year to date, Japan and the US, both gave up some of the gains made over prior months, declining 3.9% and 3.3% respectively.
In Japan, concerns rose over imported inflation lowering domestic demand after widening interest rate differentials resulted in the yen continuing to weaken. However, a $35bn intervention by the Ministry of Finance late in the month helped shore up belief that authorities would act if excessive currency moves threatened to stunt wage growth momentum and negatively impact local residents’ household budgets.
US markets pulled back as investors revised down the likelihood of the Federal Reserve proceeding with the three anticipated interest rate cuts which had been priced in. Consensus is moving towards the possibility of one or two cuts in the third or forth quarter of the year. Corporate earnings have, however, generally been stronger than expectations, averaging a 3.8% year-on-year growth rate vs. an expectation of 3.4%.
European indices bettered their American peers but still ended the month in negative territory overall. Downbeat earnings and guidance in the Autos, Insurers and Retail sectors contributed to this performance, but returns were somewhat offset by strength in Materials, Energy, and Banks.
The strongest developed market equity returns in April came from the UK, where the higher relative weighting to Materials and Energy stocks within large-cap indices drove outperformance. Similar to what was seen in Europe, further rises in commodity prices underpinned by flare-ups in geopolitical tensions and improving Chinese demand helped support returns. Domestically focused small-cap stocks also performed positively as PMI data supported the economic recovery story and inflation eased to the lowest level since September 2021 at 3.2% year-on-year.
Higher commodity exposure also helped emerging market equities deliver positive returns over the month. This was in addition to investors re-evaluating low valuation opportunities in China as policymakers in the country showed support for the yuan amid soft inflation figures. Overall economic data coming out of China was still mixed, and the Real Estate sector remains a key laggard, but confidence is slowly starting to recover, as evidenced by Chinese stocks listed in Hong Kong seeing their best week in over a decade in the last week of April.
UK Gilts and US Treasury bonds both weakened following a rise in yields, predominantly influenced by the rollback of rate cut expectations and weaker-than-anticipated US GDP figures. European sovereigns outperformed slightly, with the stance from the ECB remaining comparatively dovish.
Some individual UK REITs saw share price uplifts over the month, mostly those spurred by results releases showing debt levels declining. However, the rise in yields outweighed the positive impact of news flow on share prices for the month, with the index finishing the month down, compounding previous underperformance and leaving the asset class as the weakest performing one year-to-date.
As previously mentioned, commodities continued their positive momentum in April. The same geopolitical tensions which have partly influenced equity markets have also positively impacted these alternative assets, with gold, still perceived as a safe haven in times of stress, seeing particularly strong returns for the second month in a row following the mid-month heightening of events in the Middle East.
After a generally positive start to the year for most asset classes, April brought back some reality to the risks that still remain, with inflation, the pace economic recoveries across multiple regions, and the resulting future path of interest rates remaining key in the minds of many investors.
The value of your investment can fall as well as rise in value, and the income derived from it may fluctuate. You might get back less than you invest. Currency exchange rate fluctuations can also have a positive and negative affect on your investments. Please note that EFG Harris Allday does not provide tax advice. Past performance is not a reliable indicator of future performance.