April was a month in which economic and political events led the markets. Not much change there then.
The UK had a terrible set of inflation numbers with CPI printing at 8.7% (exceeding most expectations) and core inflation (ex energy and food) unexpectedly rose to a 30 years high, spooking the markets. The stickiness of inflation in the UK is worrying and the Bank need to get it under control before wages start spiralling out of control. The UK housing market is already on the cusp of some serious pain in the mortgage market, with HSBC twice pulling their offers over the course of ten days. With inflation still running hot, the fear is that there is much more pain to come for UK households.
In the US, the Republicans and the Democrats managed to raise their debt ceiling with a couple of days to spare and US inflation eased to its lowest print in two years. The focus is now on the Fed’s June meeting minutes where it looks more and more likely that they will pause their hiking cycle. Whether this is the inflection point remains to be seen. The Eurozone continues its steady growth, although Germany entered a technical recession.
In the markets the UK was heavily sideswiped by the inflation print with the FTSE 100 and FTSE All-Share off 5.4% and 5.1% respectively. Post this month, the UK has now given up all its gains for the year and it’ll be interesting to see whether the old adage of ‘Sell in May and come back on St Leger’s Day’ comes to fruition. The Nasdaq remains the leading stock market in performance terms year to date (+23.6%), with the Nikkei of Japan, not too far behind (+18.4%).
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