Monthly Market Roundup

European equities faced volatility not seen since Covid-19. Tariff proposals from ‘Liberation Day’ caused equities to fall sharply but ended the month slightly lower. Germany outperformed due to higher fiscal spending, while Spain benefited from its domestic nature. Value struggled with recession fears and tariff concerns. Oil prices fell over 15%, weakening the energy sector. Real estate and utilities were resilient. Eurozone economy grew 0.4%, inflation remained at 2.2%, and hiring intentions fell further in April.

The UK equity market closed modestly lower in April, as the FTSE All-Share bounced back from large losses at the start of the month when the US announced tariffs impacting global trade. The UK faced a baseline tariff of 10%, lower than those on the EU. UK inflation slowed from 2.8% to 2.6% in March, driven by falling petrol prices and computer games. UK economic growth exceeded expectations at 0.5% in February. Wage growth remained strong, but the labour market showed signs of weakness. Consumer confidence fell sharply in April, while retail sales rose in March due to good weather.

US equity markets finished the month negatively with the S&P 500 declining. Sector performance was mixed, with information technology and consumer staples leading, while energy detracted the most. President Trump announced tariffs early in the month, including significant tariffs on imports from China and the EU. The S&P 500 experienced its worst daily decline since 2020 but regained ground as plans were scaled back. US inflation fell from 2.8% to 2.4%, largely due to gasoline prices. Labour market data was mixed, with 228,000 jobs added in March, but unemployment edged up to 4.2%. Consumer confidence fell sharply, and preliminary Gross Domestic Product (GDP) data showed a contraction of -0.3%.

April began with the US administration's reciprocal tariffs announcement, causing initial negative reactions in equity markets, though they later regained ground. Chinese equity markets closed lower amid US-China trade tensions, with manufacturing activity contracting sharply. Indian equities rose, driven by strong financial sector performance and optimism over US-India trade talks. Taiwanese equities were marginally up despite high trade surpluses with the US. Korean equities rose on potential progress in South Korea-US trade talks. Japanese stocks rose as the yen weakened, boosting export-oriented companies. Australian shares ended positively due to easing global trade tensions and positive developments in China.

ASEAN equity markets had varied outcomes, with Indonesia and Thailand gaining while Singapore declined. Trade war anxieties and tariff pauses influenced the region. Latin American markets initially declined but later advanced amid global trade developments. Brazil benefits from the trade spat as an alternative food source for China, while Mexico was strongly impacted by US tariffs. In EMEA, CEE markets performed well, buoyed by hopes of a Russia-Ukraine ceasefire and Germany's fiscal policy changes. Turkey faced setbacks due to political unrest, causing volatility in currency and equity markets.

Investors repriced the likelihood of a US recession, US monetary policy, and Federal Reserve independence. US assets faced pressure, with the 30-year treasury yield trading above 5%. German government debt was seen as safer, widening the spread between 10-year treasuries and bunds. Market sentiment improved mid-month, recovering government bond prices. US treasuries returned 0.55% in April, while German bunds and UK gilts returned 2.05% and 1.82%. The US trade deficit hit a record $162 billion in March, weighing on GDP. The European Central Bank cut its interest rate to 2.25%. The UK economy grew 0.5% in February, with inflation falling to 2.6%. Corporate bond markets in Europe performed well, with sterling returning 1.27%, euro IG up 0.91%, and dollar IG returning -0.02%.