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April was a decent month for financial markets, aided by buoyant investor sentiment that was supported by the continued economic recovery, with numerous indicators showing incredibly strong growth, as well as reassurance from the Fed that they were in no hurry to withdraw monetary stimulus anytime soon.
Against this backdrop, the major equity indices climbed to all-time highs, commodities saw a big rally, and even haven assets like gold and US Treasuries recovered after a poor Q1. One asset that wasn’t so lucky was Bitcoin, with April seeing its run of six successive monthly gains finally come to an end, despite an intraday high on April 14.
The biggest story in April was a major rise in commodity prices across the board, with agricultural prices in particular seeing an astonishing surge. This is down to the combination of bad weather in a number of key regions along with a rise in Chinese imports that have had effects on both the demand and supply side.
The key industrial bellwether of copper topped the leader board with a 12.1 per cent increase, which takes the metal to its highest level in a decade. The move has been aided by continued hopes for the global economic recovery as the vaccine rollout proceeds, as well as the fact that copper stands to benefit from a wave of fiscal support that’s set to see fresh spending on infrastructure and clean energy goals.
This has also been a major contributing factor to the performance of US indices, with the S&P 500 (+5.3 per cent) and the NASDAQ (+5.4 per cent) seeing solid gains on a total returns basis, with the latter rising for a 6th consecutive month. The STOXX 600 gained 2.4 per cent, though Japan’s Nikkei (-1.3 per cent) was one of the few to lose ground on the month as the country grappled with a fresh wave of Covid19 cases.
The dollar had a poor performance in April, following a relative strong Q1. This helped other currencies on a relative basis, with the euro up 2.5 per cent vs the US dollar throughout the month, after the region shook off its vaccine woes and builds positive momentum.
Moving on to this week, one of the biggest highlights for markets will be Friday’s US jobs report for April, where consensus is that the positive momentum will be kept up from the March reading. Relatedly, US unemployment is expected to reach a post-pandemic low of 5.9 per cent according to consensus.
Another main data highlight will be the release of April PMIs from around the world, which will give us a further indication of how the global economy has performed into the month. We already have some indication about the key regions from the flash readings in April. They saw the Euro Area composite PMI rise to a 9-month high of 53.7, whilst the manufacturing PMI hit an all-time high of 63.3. The US also saw some very strong numbers, with their composite PMI at a record high of 62.2, whilst their manufacturing and services readings were also at fresh records.
We are also at the tail end of earnings season this week with several key companies reporting. Among the highlights in the S&P and more broadly are Pfizer, T-Mobile and Ferrari on Tuesday. Then on Wednesday, we’ll hear from PayPal, General Motors, Booking Holdings and Uber. Thursday sees reports from Moderna, Volkswagen, AB InBev, Rio Tinto, AIG, Societe Generale and UniCredit. Finally on Friday, Siemens, Adidas, Credit Agricole and BMW will all be releasing earnings.
The current momentum gives confidence to remain invested in risk assets. The mantra “sell in May and go away” is not applicable at the moment in my opinion, as the slow but sure economic recovery, coupled with the large amount of liquidity present in markets has created a favourable back-drop for risk assets to continue to perform short term.
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