Market Commentary

Markets bounced back in April from the March lows, with share markets largely looking through the ongoing conflict in the Middle East. Although the US and Iran landed a ceasefire, the key Strait of Hormuz remained effectively shut, keeping oil prices and inflation expectations elevated.

In the US, the Federal Reserve held interest rates steady in what was Jerome Powell’s final meeting as chair. Powell confirmed he will remain a committee member. The data backdrop doesn’t support imminent rate cuts, with the Consumer Price Index rising 3.3% and the labour market remaining resilient.

Equity markets were active over March, driven by a busy earnings season and a steady stream of headlines. Earnings results generally came in stronger than expected, providing support for equity prices. Technology led market performance, with Intel standing out after gaining more than 100% over the month.

Private market activity also drew attention, with several high-profile companies preparing for public listings, including SpaceX and OpenAI. OpenAI remained in the spotlight throughout the month, as Elon Musk testified against the company’s shift toward profit-seeking behaviour.

The AI arms race remained a dominant theme. The Magnificent Seven (Nvidia, Microsoft, Alphabet (Google), Amazon, Meta Platforms, Apple, and Tesla) delivered healthy earnings overall, but their elevated spending plans for future AI investment generated mixed market sentiment.

In the UK the FTSE 100 has gained approximately 2% in April, though this performance lags significantly behind both European and U.S. market benchmarks. Financial markets view Britain as particularly exposed to recent energy price volatility, primarily due to the nation's substantial reliance on natural gas for its energy needs. This vulnerability has contributed to investor caution and the index's comparatively modest gains.

Meanwhile, the Bank of England has maintained interest rates at 3.75%, though it has signaled that further increases may be necessary later this year. The Bank's monetary policy committee voted 8-1 to hold rates steady, but Governor Andrew Bailey warned that "higher inflation is unavoidable" as a consequence of the ongoing conflict in the Middle East.

At home in New Zealand, the Reserve Bank of NZ held the Official Cash Rate at 2.25%. However, the commentary was hawkish. Our Consumer Price Index rose 3.1%, leaving it outside the Reserve Bank’s 1% to 3% target band. Data released showed business confidence fell, and pricing intentions increased.

Our friends across the Tasman continue their battle with inflation, with their Consumer Price Index rising 4.6%. The labour market remained tight with the unemployment rate at 4.3%. With inflation at this level, people are predicting that it is likely the next decision for the Reserve Bank of Australia will be a hike.

The United States starred with its largest monthly gain since 2020, as the S&P 500 and NASDAQ went up 10.4% and 15.3% respectively. The Australian ASX 200 returned 2.2%, while the NZ NZX 50 essentially ended where it started, losing just 0.1%.