April saw a continuation of March’s mixed results in global risk assets. In the US equity markets, growth stocks continued to underperform value stocks, large caps continued to outperform small caps, and material sector rotation continued. Despite this turbulence within the broader stock market, most developed and emerging market equity indexes rose. The US March jobs report showed hiring resilience despite the poor winter weather with 192,000 new jobs; January and February employment figures were also revised higher. The Federal Reserve continued its bond purchase tapering on the last day of the month by cutting its monthly asset purchases to $45 billion and suggesting that further reductions in “measured steps” are likely in the months ahead.
April saw continued strong global M&A activity. Notable deals announced in April included Singapore’s OCBC $5 billion offer for Wing Hang Bank, Blackstone’s $5.4 billion purchase of Gates Global from Onex Corp. and CPPIB, Holcim’s $50 billion merger with Lafarge, the $18.5 billion sale of Vivendi’s phone unit to Altice, the purchase of Ranbaxy Laboratories by Sun Pharmaceuticals, Mallinckrodt’s $5.6 billion acquisition of Questcor Pharmaceuticals, Alfa Laval’s $2.2 billion purchase of Frank Mohn, Energen’s $1.3 billion acquisition of Alabama Gas, Mars’ $2.9 billion purchase of Proctor & Gamble’s pet food business, AutoNavi Holdings’ $1.5 billion sale to Alibaba, the $5.8 billion purchase by a consortium led by China Minmetals of GlencoreXstrata’s Las Bambas Peruvian copper project, TIAA-CREF’s $6.3 billion purchase of Nuveen, Google’s purchase of drone maker Titan Aerospace (price undisclosed), Zebra Technologies’$3.5 billion acquisition of Motorola Solutions’ scanner business, Post Holdings’ $2.5 billion purchase of Michael Foods Group, Novartis’ sale of its vaccines division to Glaxo for $7.1 billion and its animal health unity to Eli Lilly for $5.4 billion while purchasing Glaxo’s cancer products division for as much as $16 billion, the acquisition of Australia’s Queensland Motorways by a consortium led by Transurban Group for $6.6 billion, Zimmer Holdings’ acquisition of Biomet for $13.4 billion, Energy Transfer Partners’ purchase of Susser Holdings for $1.8 billion, and Exelon’s $6.8 billion acquisition of Pepco Holdings. Two large potential cross border deals that had not yet been accepted at month end included Pfizer’s acquisition of Astra Zeneca for $100 billion and GE’s acquisition of Alsom’s energy business for $12 billion.
Developed market equity markets mostly rose in April (see page 6), as the UK (+3.2%), Hong Kong (+2.6%), and Spain (+2.3%) led gains; the S&P 500 rose 0.7%. US small caps sharply underperformed with the Russell 2000 down 3.9% (see page 3). Energy (+5.1%) and Utilities (+4.2%) were the best performing US sectors (see page 2), while Financials (-1.5%) and Consumer Discretionary (-1.4%) were the worst performing. Large cap growth (flat) underperformed large cap value (+1%) in April (see page 3). Emerging Market equities were mostly higher in April (see page 7), with the biggest gains in Thailand (+3.9%), the Philippines (+3.5%), and Indonesia (+2.9%) and losses in Russia (-5.3%) and China (-2.3%).
In currencies, the USD Index weakened 0.8% in April (see page 8). Gains against the USD were led by the British Pound (+1.3%) and the Japanese Yen (+1%), while the New Zealand Dollar (-0.5%) and Swedish Krona (-0.5%) weakened. The USD was mixed against emerging market currencies with the biggest gains in the Korean Won (+3%), Brazilian Real (+1.9%), and the Turkish Lira (+1.3%); the Russian Ruble (-1.6%) and Indonesian Rupiah (-1.5%) weakened against the USD.
US Treasuries rallied in April (see page 10). 10 year rates closed the month at 2.65%, down from 2.72% at March month end. Investment grade credit spreads tightened slightly and high yield credit spreads widened in April (see page 11), while European sovereign spreads continued to tighten (see page 12) to multi year lows.
In commodities, the GSCI index was up slightly (+0.7%) in April (see page 9), led by gains in Agriculture (+2.7%), Industrial Metals (+1.7%), Precious Metals (+0.5%), and Energy (+0.4%); weakness was seen in Livestock (-1%). Within individual commodities, Coffee led gains (+14.4%), followed by Natural Gas (+9.8%), Soybeans (+4.6%), and Palladium (+4.6%); Sugar (-3.7%), Lean Hogs (-3.2%), Silver (-3.1%), and Crude Oil (-0.9%) weakened; Gold rose 0.9%.
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