Investors Remain Optimistic Despite Global Inflation Concerns

April 2023 saw the global equity market continue its upward trend, driven by strong gains in the technology and emerging market sectors. Despite concerns around inflation investors remained optimistic, leading to a surge in equity prices.

The stock market saw mixed results as attention turned towards the busiest week of quarterly earnings reports for the season. Traders observed that the S&P 500's strong gains, the largest since January 6, were driven by just four stocks - Microsoft, Apple, Amazon.com, and Facebook parent Meta Platforms, which surged 14 per cent after an earnings beat. Conversely, cyclical sectors struggled as investors weighed signs of an economic slowdown, particularly in the manufacturing sector, after several measures of regional manufacturing activity came in below expectations. Additionally, concerns were raised over a negative outlook for shipping volumes from United Parcel Service, which led to a 10 per cent drop in its stock price.

In Europe, major markets traded with slight losses, as fears of interest rate increases causing a recession intensified, with the pan-European STOXX Europe 600 Index ending 0.50 per cent lower. The major stock indexes were mixed to lower, with France's CAC 40 Index falling 1.13 per cent, Italy's FTSE MIB dropping 2.41 per cent, Germany's DAX advancing 0.26 per cent, and the UK's FTSE 100 Index losing 0.55 per cent. The 10-year German bund yield initially fell due to worries about the U.S. banking industry and an unexpected decline in Spanish producer price inflation.

In the eurozone, economic sentiment held steady in April despite manufacturers remaining pessimistic about production and order books. The sentiment index reached 99.3 in April versus a downwardly revised 99.2 in March, with more optimism in the consumer and retail and services sectors.

In Germany, the yearly inflation rate, adjusted to facilitate comparison with other European Union (EU) nations, decelerated to 7.6 per cent in April from 7.8 per cent in March, owing to a moderation in the increase of energy prices. Meanwhile, France recorded a rise of 6.9 per cent in consumer prices, which accelerated from the 6.7 per cent uptick observed in March. In Spain, the headline inflation rate climbed to 3.8 per cent in April from 3.1 per cent in the preceding month.

Japan's stock markets gained over the week as the Nikkei 225 Index rose 1.02 per cent and the broader TOPIX Index went up 1.10 per cent. This was supported by a dovish Bank of Japan (BoJ), which signalled a continued commitment to its ultraloose stance by leaving monetary policy, including its yield curve control framework, unchanged. The Japanese government's easing of border controls ahead of the Golden Week holidays, particularly from China, also boosted sentiment.

Chinese stocks ended mixed ahead of a five-day holiday, with the Shanghai Stock Exchange Index rising 0.67 per cent and the blue-chip CSI 300 pulling back 0.09 per cent in local currency terms. Beijing reaffirmed its supportive policy stance, vowing to continue its "forceful" fiscal and monetary policy to support the economy as it faces obstacles in economic transformation and insufficient domestic demand.

Despite China's economy expanding at its fastest pace in a year in the first quarter, policymakers remain cautious about headwinds ranging from high youth unemployment to slowing global growth. The State Council announced measures to encourage growth in the trade sector, including consolidating the shipment of vehicles and issuing visas for overseas businesspeople.