Calm markets await central banks

April was a fairly calm month on the stock and bond markets, which was completely different from the quite volatile previous month due to the bank quake. Many market participants acted cautiously and waited for the central banks and their interest rate decisions at the beginning of May.

In April, the majority of the international stock markets were able to make gains. The German share index DAX achieved a plus of 1.88% and the broad European index Stoxx Europe 600 advanced by 1.92%. In the US, the S&P 500 was down -0.03% due to the depreciation of the US dollar against the euro (result in USD: 1.46%). Hong Kong's Hang Seng Index declined -3.91%. The global equity index MSCI World moved almost sideways with 0.10% - index data in euro terms.

Compared to the turbulent previous month (banking quake), April was quiet. At the sector level, consumer staples (with recently also strong pricing power), energy and healthcare performed well worldwide, while commodities, consumer cyclicals and industrials weakened. Market sentiment was weighed down at best by expectations of further interest rate hikes by central banks, but not too much either: The majority of market participants expected the US Federal Reserve and the ECB to raise their key interest rates by 25 basis points each at their meetings in early May in view of the continued high inflation.

According to an estimate by Eurostat, headline inflation in the euro area rose by 7.0% year-on-year in the month under review and core inflation (excluding energy and food) by 5.6%, (March: 6.9% and 5.7%, respectively). In the US, headline inflation was 5% in March, down significantly from 6% in the previous month. However, core inflation in the USA rose from 5.5% to 5.6%. In addition, there were concerns that the US government deficit could exceed the statutory debt ceiling if Republicans and Democrats cannot agree to raise the ceiling. This discussion weighed on the US dollar.

On the other hand, the US manufacturing purchasing managers' index, an important leading indicator, rose. At 50.2 points (previous month: 49.2), the index reached a value above the threshold of 50, which signals an expanding economy, for the first time since October 2022. New orders and increased production were the main contributors. In China, however, this leading indicator (Caixin) unexpectedly weakened and fell slightly from 50.0 to 49.5 points. Here, the continuing decline in property prices and fears of a global recession made themselves felt. New orders and exports declined. In the euro area, the Purchasing Managers' Index for the manufacturing sector also declined and fell to 45.8 (previous month: 47.3). This was the tenth month in a row that the index indicated a contracting economy. This was due to declining demand, high inventories and lower production.

In Germany, however, business sentiment improved slightly. The ifo business climate index rose moderately from 93.2 to 93.6 points (historical average since 2005: 96.7 points), mainly due to improved business expectations. According to the ifo survey, companies want to expand their production. Capacity utilisation rose from 84.3 to 84.5 per cent and is thus above the long-term average of 83.6 per cent.

Bond markets were quiet despite the debate that has arisen over the US debt ceiling. The yield on 10-year US government bonds declined moderately from 3.47 per cent to 3.42 per cent. The yield of their German counterparts, on the other hand, rose slightly from 2.29% to 2.31%. The price of a troy ounce of gold rose by 1.05% to US$ 1,990.


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