Why did these things happen?
The main US stock market indexes were little changed overall in April, with the S&P modestly higher and Nasdaq near unchanged. The month was also marked by fairly muted trading range as the VIX (index that measures market volatility) fell.
Markets were supported by some positive themes from earnings season, the period where a large number of listed companies release their earning reports. This included better-than-feared regional bank results. However, banking fears resurfaced later in the month with the First Republic Bank expected to go into receivership.
Towards the end of the month, futures were pricing in a ~90% chance of one more 25 basis point hike in the May meeting of the Federal Reserve (the Fed).
The European economy grew by 0.1% in Q1, propped by an acceleration in business activity. Europe’s overall rate of inflation increased slightly from 6.9% to 7% in the month. This was from a peak of 10.6% last October. But while headline inflation has fallen and will continue to, economists predict three more interest rate hikes from the European Central Bank before it holds for the rest of the year.
As largely expected by economists, the RBA delivered a welcome rate pause. It was the first break after 10 consecutive months of rate hikes since April 2022. The Board highlighted a “substantial” slowdown in household spending and policy lag as reasons, although Governor Philip Lowe later said holding rates steady this time did not imply that the central bank would not raise rates in the future.
Meanwhile in China, the economy expanded by more than expected in Q1, underpinned by strong growth in exports and a recovery in retail sales and property prices. However, the recovery appears uneven. The National Bureau of Statistics of China admitted that the foundation for economic recovery was “not solid yet.”