April Monthly Market Moves

May 12, 2022

Market Overview

Market Performance 1st – 30th April 2022 (in GBP Total Return)

FTSE 100  +0.76%

S&P 500 (USA) -4.30%

FTSE Europe Ex UK  -1.96%

Topix (Japan)  -4.30%

MSCI Emerging Markets  -0.96%

In a continuation of the forces that have driven markets throughout the year, inflation and central bank policy remained the dominant factors in April. While there were no meetings from the Bank of England or the US Federal Reserve (Fed), and therefore no rate increases, early May will see both central banks make new policy announcements. In China, continued lockdowns meant supply chain pressures showed no signs of easing, and while a drop in reported COVID-19 case numbers towards the end of the month offered signs of hope, the validity of these numbers was questioned.

Inflation Rises and GDP Data Stumbles

UK consumer prices jumped 7% in the year to March, up from6.2% in February, as living standards continued to be squeezed. While fourth quarter gross domestic product (GDP) data was revised upwards to 1.3%, the latest data showed a rise of just 0.1% in February.

In the US, prices climbed at their highest rates since 1981,rising 8.5% over the year to the end of March. US GDP shrank in the first quarter of 2022, falling by 1.4% on an annualised basis.

The eurozone faced the daunting prospect of stagflation(high inflation and a low growth rate) after growth slowed to 0.2% in the first quarter of 2022, while inflation hit a record 7.5%.

The International Monetary Fund also downgraded its growth forecasts for the year, with 2022 GDP expected at 3.6%, down from January’s prediction of 4.4%.

Central Banks Prepare for Early May Meetings

Following interest rate increases from both the Fed and the Bank of England in March, April was a quiet month with neither central bank meeting to review interest rates.

However, markets continued to struggle with the uncertainty over the speed of interest rate increases, and by the end of the April were pricing in a 50 basis point (bps) increase from the Fed and 25bps from the BoE at their respective early May meetings.

Both central banks were also expected to announce more details about unwinding their recent quantitative easing programmes, by selling off some of the bonds purchased to increase market liquidity.

China COVID-19 Lockdowns Continue

China remained steadfast in its determination to see out its zero tolerance COVID-19 policy, which resulted in the lockdown of millions of people during the past two months.

While many countries attempted to diversify their supply chains during the pandemic, China remains a global hub of industry and production, and each additional lockdown causes further pain in global supply chains, adding to inflationary pressures.

Data towards the end of April suggest infection numbers were beginning to wane, meaning investors could focus on when lockdown restrictions would, once again, be eased.

Conflict in Ukraine Shows Little Sign of Abating

As the conflict in Ukraine continued, the humanitarian crisis understandably dominated headlines. However, the direct impact on markets in April was limited.

However, oil and gas prices were still affected. While the oil price retreated from highs seen at the beginning of the conflict, gas prices continued to increase.

Natural gas prices jumped as much as 20% in Europe after Russia’s energy company Gazprom cut gas supplies to Poland and Bulgaria, which refused to buckle to Russia’s demand for payment in roubles.

Commentary courtesy of Blackfinch Asset Management. Past performance is not a reliable guide to future performance. Capital at risk.

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