April was an 'ugly' month for markets, with various macro forces at play.
Middle Eastern tensions caused havoc mid-month as Iran's attack on Israel saw markets sell off and traders waited for Israel's response. Then, towards the end of the month, a ceasefire was put on the table, which has yet to be agreed. As things stand, the situation is on a knife-edge and can still go either way.
Unlike previous months, when US interest rate cuts looked set in stone, the question is now 'if' they will cut this year… which is where Minneapolis Fed Reserve President Neel Kashkari appears to sit. There are definite jitters in the markets.
On this front, our house view remains unchanged - if we were the Fed (and we are not), we would be on the side of the hawks. There is just too much uncertainty geopolitically, and inflation is only likely to rise, at least in the short term.
While the US economy still appears to be running hot, the forward-looking pathway remains unclear, with GDP numbers coming below expectations, 1.6%, compared to forecasts of 2.5%. There is now a genuine concern that stagflation is in the US economy, with the core PCE price index, a critical Fed indicator, standing at 3.7% for the quarter, against analysts' 3.4%.
China's fortunes, however, appear to be improving, with economic growth hitting 5.3% for the first quarter. China's manufacturing activities increased for the second consecutive month, with manufacturing PMI at 50.4 in April, down from 50.8 in March but above the all-important figure of 50.0.
In such an environment, equity markets had a torrid time, although there were a few outliers. The S&P 500 closed the month down 4.2%, erasing many of the gains from this year to date, and the Nasdaq closed down 4.4%.
US markets, in particular, suffered as tech stocks sold off in the run-up to results and trading updates but also on concerns about a higher for longer Fed. At one point, the combined value of Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla fell by $1.1tn in one week.
In Europe, the Dax closed down 3.0%, while the FTSE 100, which has been lagging other major indices, broke through 8,000 to close at 8,144, up 2.4% for the month.
In Asia, the Nikkei 225 fell 4.8%, largely due to tech disappointments, while the Shanghai Composite Index was up 2.6%.
With Middle East tensions increasing, fears of soaring oil prices proved wide of the mark. WTI closed the month down 1.7% and Brent up 1.0%, although oil still remains comparatively expensive (and inflationary) compared with historical prices, at $81 and $87, respectively.
In metals, copper closed the month up by around 13.0%, while aluminium and nickel prices were partly driven by the implementation of the latest Russian sanctions - aluminum closed up around 8.7% and nickel up 16.0% (source: Trading Economics). There is definite interest in this space at the moment, with hedge funds bolstering/ building commodity teams and BHP's rejected $39bn move to acquire Angle American.
In the precious metals corner, both gold and silver rallied for much of the month, only to give back large parts of the gains in the final days. Gold closed up 2.7% and silver 6.7%.
In softs, most of the coverage was about cocoa, which, having risen stratospherically on poor harvests in West Africa, slumped into month end.
Bitcoin had a dramatic end of the month to close down 13.7%, with the bears again taking charge as they latched onto poor volumes in the new Hong Kong crypto ETFs. There had been concerns early in the month that the bitcoin halving would have an impact when, in fact, the price barely budged.