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First Plus Market Update 2H April 2022

2H April Global Market Recap


16th April 2022 – 30th April 2022

FULL REPORT ACCESS LINK: First Plus Market Update 2H April 2022


U.S. GDP declined an annualized 1.4% in the first quarter of the year, significantly trailing forecasted marginal growth of 1.1%. Net exports fell 3.2% in the first quarter, due to the strong dollar and stockpiling activities by companies worried over supply shortages due to the Russia-Ukraine conflict. In March, U.S. durable goods sales rose 0.8% over February, below consensus of a 1% gain. The spread between housing starts and completions widened to above four hundred thousand units, a level last commonly seen during the period of rapid price increases between 1970-1983. Federal Reserve Chair Jerome Powell reiterated the likelihood of a 50-basis points interest-rate raise in May, a first hike of that magnitude since 2000.


Economic growth picked up pace in China during the first 3 months of the year, but factory activity subsequently plunged to a 2-year low in April due to coronavirus lockdowns that brought production to a halt in the economic belts of the country. China’s GDP rose by an annualized 4.8% rate in 2022Q1, above market consensus of 4.4%. Manufacturing PMI fell to 47.4 in April from 49.5 a month earlier. Non-manufacturing PMI plummeted to 41.9, down sharply from 48.4 in March, the largest contraction since February 2020. The national unemployment rate increased to 5.8% in March, and residential sales in March tumbled 26.2% compared to a year earlier, the biggest decline since early 2020. China’s Politburo reiterated its commitment to achieving its 5.5% GDP objective with greater policy support and stronger stimulus measures. The Politburo promised to "strengthen infrastructure building all throughout" and to help the housing market. There was also a modification in language on internet platform firms, indicating that a regulatory crackdown on the sector may be lessening.



Despite the relatively strong earning season in U.S., stocks sank in April owing to a lack of confidence in the next months. Concerns about a slowdown, sustained high inflation, and increasingly aggressive policy tightening by Fed are putting pressure on market sentiment. The S&P 500 plunged 8.8% in April, while the Dow fell over 5%, and the Nasdaq Composite fell more than 13%. Investors are waiting for further signals on the pace of the Federal Reserve's monetary tightening on Wednesday, and markets are expecting a half point rate hike to combat the highest inflation in decades.


On the final day of trading in April, tech stocks led a wide rebound in Chinese stocks as Chinese leaders pledged to boost economic stimulus and speculation rose on possibility of continued relaxation of the country's ongoing crackdown on internet firms. The Hang Seng Technology Index in Hong Kong increased by 10%, the biggest since 16 March. Bloomberg News reported that Beijing is discussing the on-site audit inspections of Chinese firms listed in New York with U.S. authorities, indicating progress in discussions to keep the listing status for Chinese companies. However, the government's renewed commitment to Covid Zero has raised questions about the government's capacity to meet its growth targets. The SHCOMP declined 6.3% in April, the CSI 300 fell 4.9%, and the ChiNext Index fell 12.8%.



The 10-year U.S. treasury yield increased by 59.56bps during the month, easing slightly from its top of 2.98% on April 20, the highest in thirteen quarters. The US benchmark rate also overtook its Chinese counterpart in the same period, erasing the yield premium that has endured since June 2010. The Fed’s balance sheet has more than doubled since the start of the pandemic in 2020 and the U.S. central bank stated it will accelerate the rate of balance sheet reduction to $95 billion a month. The market is pricing in a 50bps interest rate hike by the Federal Reserve during the first week of May and a host of other central banks around the world are also expected to raise borrowing costs shortly. A global standout would be the Bank of Japan who has restated its resolve in keeping its yield of 10-year Japanese government bonds (JGBs) below 0.25%. China’s central bank governor highlighted the priority of inflation-targeting measures and promised more assistance for small companies, after leaving policy interest rates unchanged earlier in the month and reducing the reserve requirement (RRR) ratio for banks by 25bps, a lesser margin than expected. The European Central Bank (ECB) announced it will halt its monetary easing policy in July and likely raise its rate on the deposit facility, which has been below zero since 2014, in the latter half of the year.



Global fixed income experienced its worst month in two decades as investors anticipate monetary tightening to gear up in early May. The Bloomberg Global-Aggregate Total Return Index slumped 4.9% in April, the largest monthly decline since 1990 when the benchmark was initiated. U.S. institutional loan issuance slowed down in 2022Q1. The transportation, energy and retail sectors led the decline while volume is only slightly above the start of the pandemic in the first quarter of 2020. In China, onshore property bond issues in 2022Q1 rose almost 30% to CNY70 billion, compared to the same period a year earlier, as the government loosened restrictions on home-buying and loans in various Chinese cities. However, prices of dollar-denominated bond issuances from China’s troubled property companies fell for a consecutive eighth month as onshore yuan-denominated debt payments are paid first over its dollar counterpart. China’s central bank has also stepped in as a mediator between major financial institutions and some of the largest distressed real estate developers, seeking to obtain financing and extensions of maturing debt for the latter.



The Dollar Index rose by 4.7% in the month with similar levels last seen back at the end of 2002. The Dollar Index has climbed 7.6% since the start of the year and has already exceeded the highs of March 2020, crossing the previous high of 102.8 back then when COVID-19 lockdowns were beginning, and global investors were rushing into haven assets. The Japanese Yen continued its depreciation against the dollar and fell by 6.6% with levels like these last seen back in 2007. ­­The AUD depreciated by 6% in April alone, but it was one of the biggest gainers in currencies in the first quarter of 2022 thanks to surging commodity prices. The Euro fell by 4.7% as Russia’s decision to close the gas tap to Poland and Bulgaria was the latest blow to the value of the Euro. The onshore and offshore CNY depreciated by 4.2% and 4.5% respectively as depreciation pressure on the Yuan against the U.S. dollar has intensified over the past two weeks amid more lockdowns across China. The PBOC recently announced a 1 percentage point cut to the foreign exchange deposit reserve requirement, which will see the ratio fall to 8 per cent from 15 May. ­­



Russia stopped gas exports to Poland and Bulgaria on 27th April after the two countries rejected Russia’s requirements to make payment in Ruble. Across the Atlantic, the U.S. benchmark price jumped 29% while Europe explore alternative energy sources. Natural-gas prices have more than doubled overall in 2022, as unusually low temperatures in the U.S. Northeast and sections of the Midwest also provided support for heating demand. Brent crude and WTI oil prices rose by 1.3% and 4.4% respectively, alongside mixed news that Berlin is willing to back ‘smart sanctions’ on Russian oil but coronavirus lockdowns in China reduced investors’ expectations of global economic growth. London copper prices tumbled -5.8%, the lowest in three months, over economic concerns of top metals purchaser China and dismal U.S. GDP figures. The price of corn resumed its upwards trajectory amid worries of drought in Brazil and geopolitical trade disruptions, soaring 11.0% to above $8 per bushel, a record-high since August 2012. Gold and silver fall 2.1% and 8.1% respectively, as the dollar strengthened on expectations of a rate hike by the U.S. Federal Reserve.