Market Review - April 2022

May 1, 2022

By Jan Faure

Global markets fall on global growth fears

Markets fell sharply in April against a backdrop of deep uncertainty about the trajectory of energy prices, inflation, global growth, and the Fed’s monetary policy. In the US, the S&P 500 index fell by 8.8%for the month while Europe’s Euro Stoxx 50 index declined by 2.6%. In Asia, Japan’s Nikkei 225 index dropped 3.5% while Hong Kong’s Hang Seng index declined by 4.1%.

April was a particularly grim month for technology companies as evidenced by the 13.3% drop in the NASDAQ Composite index. Heavy weights such as Netflix (-49%), Tesla (-19%), Alphabet (-18%), Amazon (-24%), Apple (-10%)and Microsoft (-10%) came under heavy selling pressure as the market found fault in quarterly earnings reports. Growth prospects were seen to be weakening under a combination of cost increases, supply constraints, Covid disruptions and greater competition. After enjoying a pandemic-driven boom, it's becoming tougher for technology companies to deliver the same levels of growth.

The bond market benchmark Bloomberg Global-Aggregate Total Return Index declined by 5.5% in April, the biggest monthly drop since its inception in 1990. The war in Ukraine and China’s fresh Covid lockdowns have raised stagflation concerns. Fixed income markets are highly vulnerable in a stagflation environment because not only does inflation hurt investor returns, but a slumping economy also raises default risks.

Preliminary US GDP figures for the first quarter showed an annualised decline of 1.4% (vs consensus estimates for a 1.1% gain).Robust consumer and business spending was overshadowed by a record US trade deficit. Net exports were a drag largely due to the US economy being in a healthier position relative to its trading partners. Businesses stockpiling also contributed to the trade deficit as many companies feared there would be supply shortages on account of the Ukraine-Russia war and renewed Chinese lockdowns. Strong consumer spending, on the back of elevated savings and pent-up demand, has been highly supportive to the US economy but this may wane in the coming months as higher prices and interest rates take a toll. Consumer spending accounts for about70% of the US economy.  

Expectations that the US Federal Reserve will aggressively hike interest rates this year has strengthened the dollar. The dollar is trading at a 20-year high against the Japanese yen and at a 5-year high against the euro. The Fed wants to hastily normalise interest rates and is expected to raise rates by 50 basis points on May 4th following a two-day monetary policy meeting. This would be the first half-a-percent rate hike since 2000.

The European Central Bank plans to end its stimulus programme in the third quarter of this year. The ECB is keeping its options open stressing “optionality, gradualism and flexibility” in the conduct of monetary policy. ECB President Christine Lagarde stressed how exposed the Euro zone is to the Ukraine conflict, outlining the negative impact on confidence and the added disruption to supply chains. She highlighted the risk of recession if the European Union were to place an embargo on oil and gas imports from Russia.

Oil price volatility continued as Chinese Covid lockdowns faced off against the fallout from the Ukraine war. China, the world’s largest crude importer, has dampened the demand side by remaining strict on Covid containment measures. China’s demand for fuel products in April is expected to drop 20% from a year ago. On the supply side, Europe has been discussing the introduction of an embargo on Russian oil and gas imports.

The Ukraine war is certain to have a lasting impact on energy markets. Countries will strive for greater energy independence, similar to how Covid-19 impacted global manufacturing and supply chains. Right now, countries reliant on Russian oil and gas are scrambling to find alternative sources of supply. Longer-term it should bolster the energy transition away from fossil fuels to cleaner alternatives such as wind, solar and hydrogen.

GLOBALINDICATORS: Local reporting currencies

Source: Bloomberg,, S&P Dow JonesIndices
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