Monthly Market Roundup cov. April 2023

European equity markets ended April up. Despite some disappointing economic data, positive earnings results provided a boost. Real estate, healthcare and energy performed best, while information technology and materials lagged.

Eurozone GDP rose in the quarter one, though by less than expected. Germany was flat (though this was better than the previous quarter’s decline), while France, Spain and Italy all saw growth – the former in line with consensus estimates.

Inflation in the region surprisingly increased (if marginally) in April, despite predictions pitching it to be flat. Eurozone inflation now sits at 7% - though local readings vary. Germany saw its lowest level of inflation for more than a year, while in Italy and Spain, it picked up more than expected.

UK shares had a positive month, finishing April up as they bounced back from March’s banking sector stock sell off.

Inflation dropped by 0.3% in March and now sits just above 10%, with expectations that it’ll drop below this level. As headline inflation continues to be driven by rising food prices, the Bank of England is expected hike interest rates further in May to try to ‘see the job through’.

Sterling rose to its high rate against the dollar in almost a year in April. As well as the dollar retreating slightly, this was supported by signs of resilience in the UK economy.

Stock markets in the US also had a fairly good month, buoyed by a strong earnings performance from US corporations. The S&P 500 index saw its second consecutive month of growth.

Fears that the banking crisis has not yet passed were reignited though, as First Republic shares lost nearly half their value. This came after the bank announced how much customers had withdrawn in deposits.

US GDP slowed in the first quarter of 2023, after a strong end to 2022. The US Federal Reserve is sticking to its guns on its interest rate-hiking cycle, which had an impact, despite headline inflation dropping to a two-year low. Core inflation (minus food and energy) was up though. 

After a promising start, Asian markets relinquished gains over the month to finish in the red. China was the biggest laggard as doubts emerged over the country’s ability to sustain its economic rebound, despite strong quarter one data.

Taiwan and Thailand also lagged. The former because of weakening technology stocks and the latter because of the upcoming elections. Korean markets also suffered off the back of disappointing earnings results from Samsung Electronics.

India and Indonesia bounced back strongly in April, after March losses. India’s central bank surprisingly left interest rates unchanged, which buoyed the real estate and consumer discretionary sectors.

Globally, emerging equity markets fell back, largely because of lost ground in Asia (particularly China). Central & Eastern Europe, Middle East and Africa (CEEMEA) and Latin America both advanced though.

Crude oil prices rose after OPEC+ (leading oil producing countries) announced an unexpected cut in production, which also had an impact.

In CEEMEA, Poland and Hungary led gains, with the UAE and Saudi Arabia also advancing. Latin American countries posted mostly positive returns with only Chile ending in negative territory. 

April provided some much-needed calm for bond markets, contrasting recent periods of volatility. April brought expectations of further interest rate hikes from central banks, continued price pressures and a persistently resilient job market.

European sovereign bonds struggled, with UK gilts underperforming most. In the US treasuries rose as optimism that US interest rates may be nearing their peak grew.

Corporate bonds ended the month on positive ground. US credit backed up March’s strong showing, once again leading the gains. Likewise, Sterling and Euro Corporate indexes also increased.