April was a fairly strong month for global risk assets. Global equities were mostly higher with continued outperformance outside of the US and by growth stocks within US markets, the USD weakened, the US interest rate curve flattened, commodities were mostly lower with continued weakness in the energy complex, and credit spreads tightened. Early in the month, the Fed minutes showed that the central bank would likely start reducing the size of its balance sheet later this year. British Prime Minister May called for a surprise early general election for June 8 in a bid to solidify her position ahead of Brexit negotiations with the EU. The ECB made no changes to interest rates or its bond buying program at its April meeting. US GDP once again showed weak first quarter growth with a 0.7% annual growth rate, the slowest rate of expansion in three years. The US job report showed that 98,000 non-farm jobs were added in March, the unemployment rate ticked lower to 4.5%, and the labor force participation rate remained at 63%.
Notable corporate transactions announced in April included the $116 billion purchase of Convergex Group by Cowen Group, Liberty Interactive Corp’s $1.1 billion acquisition of General Communication, the $7.5 billion purchase of Panera Bread by JAB, Seven & I Holdings’ $3.3 billion acquisition of the Sunoco chain of gas stations, the $5 billion merger of Swift Transportation and Knight Transportation, AT&T’s $1.6 billion purchase of Straight Path Communications, RetailMeNot’s $630 million acquisition by Harland Clarke Holdings, the $1.2 billion purchase by Lowes Corp of Consolidated Container from Bain Capital, NuStar Energy’s $1.5 billion acquisition of Navigator Energy, the $660 million purchase of Pharmachem Laboratories by Ashland Global, Blackstone’s $2 billion acquisition of EagleClaw Midstream Ventures, the purchase of Focus Financial Partners by KKR and Stone Point Capital for an undisclosed price, Virtu Financial’s $1.4 billion acquisition of KCG Holdings, and LVMH’s $13 billion purchase of the remaining stake in Christian Dior.
Developed market equity markets were mostly higher in April (see page 8), with the largest gains in France (+3.5%), Hong Kong (+3.2%), and Spain (+2.7%); the worst performing were the UK (-1.3%), Italy (flat), and Canada (+0.4%). US small caps performed in line with large caps, as both the Russell 2000 and the Russell 1000 were up 1.1% (see page 3). IT (+2.5%), Consumer Discretionary (+2.4%), and Industrials (+1.8%) were the best performing sectors in April, while Telecom (-3.3%), Energy (-2.9%), and Financials (-0.8%) were the worst performing (see page 2). Large cap growth (+2.3%) outperformed large cap value (-0.2%) in April (see page 3). Emerging Market equities were higher in April (see page 9), with the biggest gains in the Philippines (+5.2%), Indonesia (+3.3%), and Korea (+2.8%); Thailand (+0.7%), Brazil (+0.7%), and Russia (+0.7%) were the worst performing.
In currencies, the USD Index was down 1.3% in April (see page 10). The strongest developed market currencies against the USD were the British Pound (+3.2%), Euro (+2.3%), and Swedish Krona (+1.3%); the weakest were the Canadian Dollar (-2.5%), New Zealand Dollar (-2%), and Australian Dollar (-1.8%). Emerging market currencies were mostly higher against the USD, with the biggest gains in the Turkish Lira (+2.4%), Malaysian Ringgit (+1.9%), and Indian Rupee (+0.9%) and losses in the Korean Won (-1.8%), Brazilian Real (-1.7%) and Russian Ruble (-1.3%).
The US Treasury yield curve flattened in April (see page 12). 10 year rates closed the month at 2.28%, down from 2.39% at March month end. Investment grade and high yield credit spreads tightened in April (see page 13).
In commodities, the GSCI index was down 2.1% in April (see page 11), with gains in Livestock (+8.6%) and Precious Metals (+0.6%) and losses in Energy (-3.6%), Industrial Metals (-3.1%), and Agriculture (-1.7%). Within individual commodities, Feeder Cattle (+15.1%), Live Cattle (+11.9%), and Palladium (+3.6%) saw the biggest gains, while Cocoa (-12.9%), Gasoline (-9.1%), and Silver (-5.8%) saw the biggest losses. Gold was up 1.4% for the month.
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