Tuesday 31/03/2020

Top Header


Monthly Market News

Investment Desk Analyst

Your monthly appointment with the financial markets. What were the trends for equities, bonds, currencies and commodities in the past month, and what made the markets move ? You can discover the most striking evolutions in this clear and concise analysis.

Equity markets

In April, the European equity markets chalked up the best performance. However, it is still the US equity prices that top the charts. In the past month, the Nasdaq Composite hit a series of new ‘all time highs’. The month did not get off to a good start, however, due to the political tensions between the US, Russia and North Korea. On top of this, greater uncertainty crept into the market in the run-up to the first round of the French presidential elections. After a reassuring result in the first round, European equities experienced a small rally and ultimately ended April with a gain of 2.3% (MSCI EMU). The other markets were also positive in local currency, although the strong euro meant that their performance was negative for European investors. The performance of European equities in April (and since the beginning of this year) not only reflects the political risks, but also the distinctly better fundamentals. The announcement of the results for the first quarter indicates that so far growth has been recorded in all sectors, in both sales and profits. In the United States, President Trump revealed the outlines of his tax reform plan, but so far the details are few and far between. The budgetary impact also remains unclear.


Bond markets

The first round of the French presidential elections caused a considerable stir on the European bond markets. In the week before the population headed for the polling stations, spreads of French bonds – and at the same time those of most other European government bond issuers – widened against German bonds. After the first round, the French spread narrowed again from 75 basis points to 52 basis points at the end of the month. The peripheral countries also benefited from the easing of uncertainty concerning France. Portuguese bonds saw their yield fall by about 50 basis points in April to close the month at 3.55% compared to a peak of 4.24% in February. The improved economic situation since the beginning of this year is enabling Portugal to get its debt problems under control. This positive trend is admittedly still overshadowed by the precarious situation of Portuguese banks, which for the time being is stymying a rating upgrade of the country. Greece has concluded a deal with its creditors to obtain the next tranche from the rescue programme of EUR 86 billion. Debt restructuring remains a bone of contention among the creditors (indispensable for the IMF, out of the question for Germany), but with the agreement nevertheless seems to be a small step closer. Corporate bond spreads also narrowed somewhat because investors showed a greater appetite for risk in that market segment too.


Central banks and monetary policy

No changes in interest rate policy occurred in either the euro area or the United States. ECB President Draghi announced in a speech that the economic recovery is gradually consolidating, but added that there is still no certainty concerning a sustainable rise in inflation. Monetary policy will therefore remain very accommodative for a considerable time yet. Although the Swedish central bank left the interest rate unchanged at -0.5%, it surprisingly extended its bond purchase programme by a monthly SEK 15 billion. The prospect of a first interest rate hike was also postponed until mid-2018. In its commentary, the central bank pointed out that it would take a while yet before inflation stabilises at around 2%, despite the better economic growth. In the United States, the market is assuming a next interest rate hike already in June. The implicit expectation, based on futures, indicates an over 80% probability.



The euro consolidated further against most currencies, gaining strength mainly after the result of the first round of the French presidential elections. The reduced probability of victory by a Euro-sceptic candidate meant that ‘safe haven’ currencies, such as the USD, CHF and JPY, were less in demand. Commodities linked currencies also put up a weak performance due to lower commodities prices (AUD - 4.2% against the EUR). The Swedish krona (-1.0% against the EUR) lost ground following the surprising announcement by the Swedish central bank to keep to an accommodative monetary policy for longer than expected. The exception to the rule was the GBP, which rose 1.3% against the EUR after Prime Minister May unexpectedly announced early elections on 8 June. The market expectation seems to be that May’s Conservative Party will emerge stronger from the ballot, indicating that she has a clear mandate for embarking on the Brexit negotiations. Whether that will then lead to less friction with Brussels remains to be seen.



April was again a volatile month for gold. In the run-up to the first round of the French presidential elections, the gold price rose to just under 1300 USD/ounce. Also the rising tensions with North Korea made for increased interest in safe haven investment. The result of the first round of the elections, and the ever greater likelihood of an interest rate hike by the Fed in June, then took the shine off the gold price. Industrial metals experienced a weak month. The oil price continues to fluctuate according to the hope of extension of the production restriction and the fear that this production restriction will not eliminate the surplus oil supply on the market. Brent crude closed the month below the 50 USD/barrel mark.



MSCI indices: source MSCI. Neither MSCI nor any other party involved in or related to compiling, computing or creating the MSCI data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such data. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in or related to compiling, computing or creating the data have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted without MSCI’s express written consent.