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Market Snapshot - April 2024

2 months ago

In brief

With US jobs growth remaining strong and inflation proving stickier than expected, speculation grew that the US Federal Reserve (Fed) would delay cutting rates until the end of 2024. The ‘higher for longer’ mantra undermined both equity and bond returns in April.

China’s economy expanded by 5.3% year on year in the first quarter, a stronger than expected outcome. The data boosted hopes that the worst of China’s slowdown was now behind it, although the real estate sector continues to be a drag.

Fears escalated that the Middle East conflict would spread within the wider region. However, tensions subsided somewhat in the midst of ongoing international intervention, although they remained elevated. 

The Markets


Global equities sold off, with the MSCI All Countries World Index falling 3.4% over April. US stocks were among the weakest performers (S&P 500 -4.2%) as investors reassessed the extent to which the Fed will be able to cut rates this year. European and Japanese shares also lost ground (EuroSTOXX 50 -3.2%; TOPIX -0.9%). In contrast, UK shares rose modestly, with the FTSE 100 Index rising 2.4%, helped by its relatively large weighting to energy and utilities companies, both sectors that withstood the broader retreat. Chinese equities also rebounded (MSCI China +6.4%), helped by stronger than expected Q1 GDP growth, as well as the authorities’ measures to restore confidence in financial markets.


Global bonds weakened as investors reassessed the scope for major central banks to cut rates. US bond yields rose the most, although bond yields also moved higher in Europe, even though the European Central Bank arguably has more room to cut rates than the Fed. The 10 year US Treasury returned -3.5% while the 10 year German Bund returned -2.1%. Corporate bonds held up better than government debt, with credit spreads closing the month around the tightest levels in more than two years. High yield bonds fared the best as their larger coupons helped to insulate them from rising government bond yields.


The US dollar appreciated against other major currencies over April, with the Dollar Index gaining 1.7%, as markets priced in US interest rates remaining high for an extended period. While the euro fell 1.1% against the dollar, the Japanese yen declined 3.9%, hitting a 34 year low and raising speculation that the Bank of Japan might intervene to support the currency.


Oil prices rose as the tensions between Israel and Iran threatened to spill over into other countries, but later retreated as the conflict appeared to be contained. Brent crude closed the month at $87.9, little changed from its level at the end of March. Gold, which is often viewed as a safe haven in times of uncertainty, rose 2.9% to $2,294.80 a troy ounce.

Market Volatility

Market volatility

Volatility jumped given the heightened geopolitical tensions in the Middle East. The Vix Index climbed 20.3% to close at 15.7, although it remained below the 20 level which is usually viewed to be an indicator of market stability.

Responsible investing

With ESG investing appearing to fall from favour in the US, there are also signs that European investors are looking elsewhere. According to Morningstar, net flows into European ESG exchange traded funds (ETFs) almost halved in Q1 2024 – both in terms of money flows and the percentage of total ETF sales – and are down sharply from the peak in 2022.

On the radar

  • The strength of the US dollar could start to cause inflationary problems for other countries with weakening currencies, after Bank Indonesia raised rates to protect the rupiah at a four year low. Now currency markets will be watching for action by the Bank of Japan to protect the yen.
  • Data releases will be closely analysed, after the European Central Bank suggested that the case was strengthening for rate cuts in June. However, policymakers signalled that this would likely be followed by a pause as they assessed the inflation outlook.
  • The Fed has kept interest rates on hold, signalling that they would need to be kept high due to a lack of progress in reducing inflation to the 2% target. Markets will be looking for clues in inflation data, perhaps indicating that rates might not be reduced until the year end – if at all.

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