This month’s market commentary looks back at April and more recent events that have transpired along with some of the key considerations.
Strong US data sees equities higher again
US stocks once again reached record highs in April, as investors continued to react to a combination of improving economic data, increased growth prospects and a successful vaccination roll-out. During the month, emphasis swung back and forth between technology and more cyclical sectors, with the NASDAQ technology-heavy index often moving in the opposite direction from the main market. Continued strength in the oil market also added firm support for energy stocks.
Small caps continue to lead UK recovery
UK Smaller companies had another strong month in April, once again outpacing the mid and large-cap companies in the UK market. This is part of a global rotation towards smaller companies since the vaccine announcements of last November, but is particularly visible in the UK, where large, medium and small-cap companies each have their own index. The trend continues to be driven by a number of factors, such as small-caps’ lesser exposure to the strong pound, M&A activity, and the size of the workforce making them more adaptable during times of crisis.
European majors mostly positive
Despite poor GDP numbers from Germany, the EU as a whole performed reasonably well in April, with France leading the gains. This was despite school closures and travel restrictions imposed early in the month to combat the spread of Covid. The Bank of France Governor said on national radio that the country had adapted to work with the virus, and that April activity seemed to be declining less than expected.
Japan stumbles on poor economic data
Household spending fell by 6.6% year-on-year in February: the third successive fall, which saw almost all sectors of the Japanese market weaken. This was followed later in the month by worse than expected earnings announcements. Retail sales, however, grew by 5.2% YoY in March, considerably ahead of the forecast 4.7% rise. Other economic data also surprised on the upside and the Bank of Japan raised its projected growth rate for 2022 from 1.8% to 2.4%. Investors, however, repositioned themselves cautiously ahead of the ‘Golden Week’ holiday of 3-5th May.
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Jennifer Turner
