APRIL - Corporate activity grips UK markets

Despite ongoing Brexit-related uncertainties and fresh political instability in the UK, newsflow during April was dominated by a wave of corporate activity. Elsewhere, the ECB reassured investors that its supportive stance remained intact, while the BoJ’s quarterly Tankan survey revealed a decline in optimism amongst large Japanese manufacturers.

  • Core US inflation picked up to 1.9%

  • UK economic growth was disappointing in Q1 

  • Business confidence deteriorated in Germany

Despite ongoing Brexit-related uncertainties and fresh political instability in the UK, newsflow during April was dominated by a wave of corporate activity that reached across the FTSE 100 Index. In particular, investors were surprised by the news that supermarket retailers Asda – owned by US retailer Walmart – and Sainsbury’s were planning a merger. Meanwhile, widespread expectations of an increase in interest rates in May were dampened by disappointing first-quarter economic growth and softening consumer price inflation. The FTSE 100 Index rose by 6.4% over the month.

Having expanded at an annualised rate of 2.9% in the final quarter of 2017, US economic growth lost some momentum in the first three months of 2018, posting growth of only 2.3%. Activity was hampered by a slowdown in consumer spending growth. Nevertheless, the annualised rate of inflation strengthened to 1.9% in March. Minutes from the March meeting of Federal Reserve (Fed) policymakers reflected an increasingly sanguine view of the US economic outlook, although Fed officials voiced concern about the recent escalation in trade tensions between the US and China. The burgeoning trade war triggered by President Donald Trump’s imposition of tariffs on key imports continued to cause widespread disquiet, and the World Trade Organisation (WTO) warned that global economic growth and confidence had been “tilted to the downside”. The Dow Jones Industrial Average Index rose by 0.2% during April. 

The European Central Bank (ECB) reassured investors that its supportive stance remained intact, confirming that it would continue with its planned programme of monthly bond purchases until the end of September, and that asset purchases would continue beyond this date “if necessary”. Elsewhere, business confidence in Germany deteriorated during April, according to the Ifo Institute’s business climate survey. The Dax Index rose by 4.3%, while the CAC 40 Index climbed by 6.8%.

Optimism amongst large Japanese manufacturers weakened during the first three months of 2018, according to the Bank of Japan’s (BoJ’s) quarterly Tankan survey, although this was tempered by signs that current capacity is not sufficient to meet future demand. The country’s government expects the economy to rebound during the first quarter, having shrunk by 1.6% over the final three months of 2017. The Cabinet Office continues to expect a gradual recovery in economic growth and consumer spending. The Nikkei 225 Index rose by 4.7% over April as a whole.