Introduction

April 2024 delivered a sharp reality check to markets as inflation readings surprised to the upside and central banks pushed back against premature rate cut expectations. After a strong first quarter, equities retreated, bond yields rose, and volatility returned. While fundamentals remained broadly healthy, investor sentiment turned cautious as the soft-landing narrative was tested by sticky inflation and elevated geopolitical risk.

United States

U.S. equities posted their first monthly loss since October 2023. The S&P 500 declined 4.1% and the Nasdaq Composite dropped 4.4%, pressured by rising yields and concerns that the Federal Reserve would delay its first rate cut. The March CPI, released in April, showed headline inflation at 3.5% year-on-year and core inflation at 3.8%, both above expectations.

At its April meeting, the Federal Reserve held rates steady and signalled that rate cuts were unlikely before late summer, citing slower-than-expected disinflation. The 10-year Treasury yield surged to 4.67% by month-end, its highest level since November, dragging down interest-rate sensitive sectors such as real estate and small caps.

Europe

European equities also retreated. The Euro Stoxx 50 fell 2.6%, with weakness in utilities, autos, and consumer discretionary. Inflation data in the eurozone was mixed: headline CPI remained at 2.4%, while core inflation ticked slightly higher to 3.2%. Economic indicators showed tepid growth, especially in Germany and Italy.

The European Central Bank maintained its policy rate at 4.00% but hinted at a potential cut in June, provided that inflation continues to ease. Despite this, rising global bond yields pushed up European borrowing costs. The euro weakened slightly versus the dollar, and bund yields followed U.S. Treasuries higher.

Asia-Pacific

Asian equity performance diverged in April. Japan's Nikkei 225 dropped 2.3% as profit-taking set in after its Q1 rally. The Bank of Japan left policy unchanged and reiterated its dovish stance despite a weakening yen, which dropped to multi-decade lows against the dollar. Intervention risks rose but no formal action was taken.

China's markets were more resilient. The Hang Seng Index gained 3.5% and the Shanghai Composite rose 1.2%, helped by fiscal support, improved Q1 GDP growth at 5.2%, and early signs of stabilisation in the housing sector. Australia's ASX 200 slipped 1.7%, weighed by weak materials and concerns over slowing domestic consumption.

Emerging Markets

Emerging markets faced renewed headwinds in April. The MSCI Emerging Markets Index declined 2.9% as U.S. dollar strength and rising global yields reduced investor appetite. However, performance varied significantly by region.

India's Nifty 50 dropped 1.2% ahead of its national elections, with foreign flows moderating. Brazil's Bovespa fell 2.6% as inflation edged higher, pressuring the central bank to slow its easing cycle. Meanwhile, Mexico and Southeast Asian markets remained relatively stable thanks to strong trade data and favourable currency dynamics.

Commodities

Oil prices spiked early in the month on escalating conflict in the Middle East but faded toward month-end. Brent crude ended at USD 87/barrel, after briefly touching USD 91. Supply chain disruptions were largely contained, and global inventories remained steady.

Gold hit new all-time highs mid-month, trading above USD 2,400/oz, before paring gains to close at USD 2,335/oz. Investor demand remained strong amid rate uncertainty and geopolitical risk. Copper rose 4.1% on tight supply and improving industrial activity in China and the U.S.

Fixed Income & Currencies

Global bond markets sold off in April. The U.S. 10-year yield jumped over 30 basis points, driven by sticky inflation and delayed Fed easing. The curve steepened, and real yields moved higher. Credit spreads widened modestly but remained below historical averages.

The U.S. dollar strengthened across the board, with notable weakness in the yen, euro, and EM currencies. The Singapore dollar was stable after the Monetary Authority of Singapore (MAS) left policy unchanged and expressed confidence in the inflation trajectory.

Outlook

April reminded investors that while disinflation is progressing, the path to lower rates may be uneven. Central banks continue to strike a balance between containing inflation and supporting growth. Earnings season, upcoming elections, and evolving geopolitical risk will drive sentiment in the near term.

Brightness Capital & Asset Advisory maintains a disciplined, multi-asset approach with active management of duration, FX exposure, and sector allocation. We remain selectively constructive on equities, favouring cash-flow-generative businesses, and continue to see opportunities in short-duration credit and quality EM debt.