April was a very mixed month for global risk assets. Emerging market equities outperformed developed market equities, large caps outperformed small caps, energy equities rebounded on the back of a sharply stronger oil complex, and the US Dollar retreated. The month started with a weak US jobs report, which showed that 126,000 new jobs were added in March, the slowest pace in 15 months. This brought down average monthly job growth for Q1 to 197,000, down from 324,000 in Q4. Late in the month, Q1 GDP growth was reported to have slowed to just 0.2%, down from 2.2% in Q4; analysts blamed the weakness on winter weather, a strong dollar, the West Coast port labor dispute, and weaker energy investment. The Federal Reserve suggested that many of these factors were ‘transitory’ and that economic growth should accelerate as the year progresses, though it appears that a mid-year interest rate hike is now off the table.
Notable corporate transactions announced in April included a $5 billion buyout of Informatica by Permira and CPPIB, Fedex’s $4.8 billion acquisition of TNT Express, Royal Dutch Shell’s $60 billion purchase of BG Group, GE’s $30 billion sale of real estate holdings to Blackstone and Wells Fargo, LinkedIn’s $1.5 billion acquisition of Lynda.com, Blackstone’s $1 billion purchase of Excel Trust, Nokia’s $16.6 billion acquisition of Alcatel-Lucent, Prologis’ $5.9 billion purchase of KTR Capital, Raytheon’s acquisition of Websense as part of $1.7 billion investment in cybersecurity, Brookfield’s $1.7 billion purchase of Associated Estates, and Ship Finance’s $272 million purchase of eight dry bulk carriers from Golden Ocean Group.
Developed market equity markets were mixed in April (see page 8). Hong Kong (+9.1%), Japan (+3.3%), and the UK (+3.3%) saw the biggest gains, while Germany (-4.4%), Australia (-2%) and Spain (-0.8%) saw the biggest losses. US small caps underperformed, with the Russell 2000 down 2.6% (see page 2). Energy (+6.6%), Telecom (+5.9%), and Materials (+3.1%) were the best performing sectors in April, while Health Care (-1.3%), Consumer Staples (-0.8%), and Utilities (-0.4%) were the worst performing (see page 2). Large cap growth (+0.5%) slightly underperformed large cap value (+0.9%) in April (see page 3). Emerging Market equities were mixed in April (see page 9), with the biggest gains in China (+16.6%), Brazil (+9.6%), and Russia (+6.6%); Indonesia (-10.6%), India (-5.1%), and the Philippines (-3.1%) were the worst performing.
In currencies, the USD Index weakened 3.8% in April (see page 10) and was weaker against all major developed market currencies. The strongest developed market currencies against the USD were the Norwegian Krone (+7%), Canadian Dollar (+5.1%), and Euro (+4.6%). The USD was also weaker against most emerging market currencies with the biggest gains seen in the Russian Ruble (+12.7%), Brazilian Real (+6%), and Malaysian Ringgit (+3.8%); the Turkish Lira (-2.8%), Indian Rupee (-1.9%), and Thai Baht (-1.4%) weakened against the USD (see page 10).
The US Treasury yield curve steepened in April (see page 12). 10 year rates closed the month at 2.03%, up from 1.92% at March month end. Investment grade and high yield credit spreads were little changed in April (see page 13).
In commodities, the GSCI index rose 11.1% in April (see page 11), with gains in Energy (+17.4%), Industrial Metals (+7.9%), and Livestock (+0.7%) and losses in Agriculture (-1.6%) and Precious Metals (-0.4%). Within individual commodities, Crude Oil led gains (+21.3%), followed by Brent Crude (+18.3%), and Heating Oil (+15.6%); Wheat (-7.1%), Corn (-4.6%), and Silver (-2.9%) moved lower. Gold was down 0.1% in April.
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