Commentary by Luna Investment Management – A Thornbridge Appointed Representative

Global Inflation

Sticky, that was the key word for the month. Inflation globally is proving to be ‘sticking around’ for longer than anticipated. Couple this with stronger economic growth and the expectation that interest rates would come tumbling down is starting to fade. The US Consumer Price Index (CPI) increased to 3.5% from 3.2% during the month. UK inflation fell but not by as much had been hoped. CPI is now 3.2%, still above the 2% Bank of England target. This backdrop was a headwind to bond investors with nearly all fixed income asset classes delivering negative returns during the month.

Global Equity Markets

Global equity markets delivered diverging returns during April. The Japanese market, which has been supercharged for nearly a year now, saw some profit taking following the ongoing weakness of the yen. To a sterling investor the Nikkei 225 was down over 7% during the month. On the flip side, Chinese equities are bouncing from a very low base and returned over 8%during the month. Closer to home though, finally some positive headlines for a UK investor. The FTSE 100 broke through and hit an all-time high during the month, and did so for four days on the trot. This was thanks to stronger commodity markets and financials performing well – key sectors in the FTSE 100.

Global Commodity Indices

April was a month of ascendance for global commodity indices, with the S&P Goldman Sachs Commodity Index climbing by 1.5%. This rally was underpinned by a notable surge in gold, which broke past the $2,400 mark, setting a new nominal record before experiencing a minor pullback. The base metals sector also saw impressive gains with zinc and copper prices climbing by 18.3% and 13.2% respectively, driven by robust demand from improved manufacturing activities in the US and China, and by ongoing supply disruptions.

Looking forward and into May, the Federal Reserve meet early in the month with little expected. Significant attention will continue to be on inflation data. US CPI figures will be released on the 15th of the month with the UK CPI data released exactly a week later on the 22nd. In the short term, this is the key driver of both bond and equity markets.

Author: Alex Hackett

Alex a Business Development Manager and a member of the investment funds team and is involved in portfolio construction, regulatory reporting, trade surveillance and monitoring.

Author: Thornbridge