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Archinomics Monthly - April 2021

4 months ago



Developed market equities rose in April, led by the US where new stimulus plans buoyed the stock markets. The S&P 500 crossed the 4,000 level at the beginning of the month and remained above it throughout. Most regional European stock markets rose over the month, as the pace of Covid-19 vaccinations picked up, pushing the Euro Stoxx 600 index to a new all-time high. The UK’s FTSE 100 also gained ground. The MSCI Emerging Markets index rose 2.4% over the month, with a 1.2% gain from China. Elsewhere, Japan’s Topix lost 2.9%.


In government bond markets, US Treasury yields fell over the month (as prices rose). The yield on the 10-year US Treasury finished April at 1.63%, while the 30-year bond was at 2.3%. Conversely, the 10-year German bund yield rose over the month, on the back of rising inflation in the region. In corporate bond markets, investment grade bond prices rose in the US but were flat in Europe, while high yield bond prices rose in both regions. Emerging market debt also ended the month higher (both local currency and US dollar-denominated bonds).


Currencies with strong links to commodities rose in April, and the best performing currency was the Brazilian real. The US dollar suffered its worth month for almost a year, and the US Dollar Index (which tracks the dollar’s performance versus a basket of its peers) fell 2.7%. As a perceived safe haven asset, the dollar fell as the global economic outlook continued to brighten. The euro had a strong month, rising against the dollar, sterling and the yen. The yen was weaker against the euro, but strengthened against sterling and the dollar.


The price of copper rose by 12.1% in April, hitting a 10-year high of more than $10,000 per tonne during the month. It was also a positive month for oil, and we saw the price of Brent Crude oil gain 5.8% to finish at $67.30 per barrel. Both commodities benefited from expectations of increased demand as the global economic outlook improves. Elsewhere, the price of gold was relatively flat over the month, finishing at $1,769 per ounce.

Market Volatility

Market volatility

Stock market volatility was fairly subdued in April. The VIX index of implied stock market volatility hovered between 17 and 19 throughout the month, and finished at 18.6.

Responsible investing

In April, President Joe Biden hosted 40 world leaders for a virtual summit on climate change. The summit highlighted the need for international cooperation when tackling climate issues, and several countries announced new targets for reducing carbon emissions. Speakers also focused on the need for technological innovation in the transition to a low-carbon world, and the economic opportunities that this could bring.


Economic growth for Q1 came in strongly for the US and China, driving the prices of commodities such as copper and iron ore to recent highs. Meanwhile the eurozone fared less well, pulled lower by Germany, as lockdown restrictions took their toll on activity.

Vaccination programmes against Covid-19 accelerated in Europe and continued apace in the US, the UK and Israel, prompting speculation that herd immunity might have been attained. Meanwhile a new variant sent infection rates to record levels in India.

President Biden’s virtual global conference on climate change followed his own proposal of a 50% cut in US emissions by 2030. This ambitious target resulted in new pledges from countries such as China, Japan and Canada.


on the

Growth forecasts look set to be revised upwards in many of the world’s economies, boosted by post-pandemic reopening, pent up consumer spending and a rise in trade. Improving expectations elsewhere could result in renewed weakness for the US dollar.

President Biden’s latest stimulus plan, the $1.8 trillion ‘American Families Plan’, will be put before Congress. Strong resistance is expected from the Republican Party, with the plan set to be financed by increases in corporation and capital gains tax.

After a strong run for equity markets, with some already touching year end forecasts, high valuations might leave some vulnerable to correction. Volatility spikes caused by inflation fears or fresh Covid-19 outbreaks could recall the old adage ‘Sell in May and go away’.

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