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LuxTopic - Systematic Return A

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As at:
83.54 EUR
87.72 EUR

Monthly Commentary

In April, the stock markets were able to recover some of the losses of previous month. The German stock index rose 9.32% and the broad European index Stoxx Europe 600 advanced 6.24%. The US S&P 500 index gained 13.03% and in Asia the Hong Kong Hang Seng index (Hong Kong) increased 5.60%. World equities, as measured by the MSCI World, rose 11.15% - all index data on a euro basis. The equity markets reacted with some relief to the declining numbers of new corona infections and the gradual easing of restrictions on people and trade in China, Europe and the US. The successful application of the Ebola drug "Remdesivir" to Corona patients also provided hope. The continued very expansive monetary policy of the major central banks also had a positive impact on the stock markets. After the bond purchase program of previous month the Federal Reserve Bank (Fed) announced an additional rescue package in the USA with a volume in height of USD 2,300 billion. The Fed also announced that from now on it would also buy ETFs on corporate bonds with poor credit ratings. The European Central Bank made similar announcements, stating that it will also accept corporate bonds as collateral from issuers that have only recently lost their investment grade rating. In China the Bank of China cut its one-year key interest rate by 20 basis points to 3.85%. Similar to the central banks governments in Europe and the US also continued their expansive fiscal policy. For example, the EU adopted a EUR 500 billion package of measures, including short-time allowance and in the USA the USD 2,000 billion rescue package of previous month was extended by USD 484 billion. In spite of the rally on the stock markets yields on the bond markets also declined. 10-year German government bonds yielded -0.58%, eleven basis points lower than previous month. The yield on their US counterparts fell from 0.67% to 0.64%. The decline in yields on high-yield corporate bonds was more pronounced, especially in Europe. There, the yield on these papers fell by 262 basis points to 6.92%, while the yield on US high-yield corporate bonds fell to 8.05% and 139 basis points respectively. On the other hand, economic indicators in Europe and the US collapsed and for the first time in history a negative oil price (for WTI) was recorded because demand fell sharply and there was little storage capacity left worldwide. At the end of the month, the oil price was USD 19 (WTI) and USD 26 (Brent) per barrel. The German ifo business climate index fell from 86.1 to 74.4 points, still below the level of the financial crisis of 2008. The purchasing managers' indices, which indicate an expansive economy from a value of 50 points upwards, fell in Germany by 11 to 34.4 points for industry and by 15.8 points for services to a level of 15.9. In the euro zone, the purchasing managers' indices plunged to 33.6 (industry) and 11.7 points (services). In the USA the development was similar. Economic output in the euro zone shrank in the first quarter by an estimated -3.80% and in the U.S. by -4.80% compared to the first quarter of 2019. In China, the economy also collapsed by -6.80% compared to the same quarter of previous year. But there were also confident signals coming from there: the Caixin purchasing managers' index (industry) jumped from 40.3 to 50.1 points. In addition, industrial production, exports and imports contracted, but to a much lesser extent than the markets feared.

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