Market Review April

UK

The FTSE All-Share Index advanced 4.9% in sterling terms during April, recovering some of the sharp losses of the prior month. In mid-April, the UK government extended the country’s COVID-19 lockdown by a further three weeks, though related deaths and new infections began to slow during the second half of April. UK data showed manufacturing and services activity contracted at a record pace in April, while retail sales plunged in March as consumer confidence hit its lowest level since 2008. There was also a sharp rise in small business failures in March. Against weak economic activity and lower oil prices, UK inflation fell to 1.5% in March versus 1.7% in the prior month. In terms of sectors, leisure goods (37.8%) and industrial transportation (18.4%) outperformed, while banks (-8.6%) and nonlife insurance (-7.4%) lagged.

FTSE All-Share Total Return (TR) GBP (%)*

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Europe

The FTSE World Europe ex-UK Index rose 4.6% in sterling terms. The eurozone’s economy contracted 3.8% in the first quarter versus the prior quarter as the COVID-19 pandemic scuppered business activity, with France and Italy entering recession. Survey data showed eurozone business activity had dropped to record lows in April against social distancing measures. However, as the month progressed, various European countries began to ease lockdown measures given falling deaths and new infections. Germany’s ZEW economic sentiment gauge showed some improvement in April versus the prior month as some local restrictions were lifted and German factories began to restart production. Eurozone finance ministers agreed a €500bn relief package, including €240bn to be made available to indebted eurozone countries through the European Stability Mechanism. Official estimates put eurozone inflation at just 0.4% in April versus 0.7% in March.

FTSE World Europe ex UK TR GBP (%)*

US

The FTSE All-World North America Index gained 11.1% in sterling terms over April, rebounding from the prior month’s sell-off. Various US states outlined plans to begin reopening their economies, despite the US Centers for Disease Control and Prevention agency calling for a more cautious approach while domestic COVID-19 cases remain elevated. The Federal Reserve unveiled an extra $2.3tn of credit relief in response to the pandemic, including measures to support the high yield and municipal bond markets. Congress approved an additional $484bn in relief measures, targeting small businesses, hospitals and COVID-19 testing. US unemployment claims continued to rise steeply in April, in line with the trend witnessed in the prior month. The US economy contracted by an annualised 4.8% over the first quarter, the sharpest decline since 2008, largely reflecting the impact of social distancing measures in March.

FTSE All-World North America TR GBP (%)*

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*Source: Lipper to 30 April 2020, total return. Indices rebased to zero at 31 March 2020.

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