Conciliatory tones later in the month saw markets rally, all but recovering losses from earlier the month. US equity markets still ended the month in negative territory, while markets outside the US delivered credible returns despite the elevated levels of volatility. US tariffs on China now amount to 145%, while the country has responded with its own tariffs on US goods. While this weighed heavily on Chinese equity markets in the first half of the month, a credible first quarter GDP print of 5,4% and the possibility of negotiations eased tension in the latter half.

The IMF downgraded the outlook for global growth to 2,8% from 3,3% with notably downgrades to US economic growth. OPEC+ members surprised markets with a larger increase in output than expected for May, despite lacklustre prices and growing concerns around global growth. The oil price declined by 15,5% over the month, dropping to $63 per barrel by month end. Further meetings between the US and Ukraine seemingly brought progress to the prospect of a ceasefire deal. Russia announced a three-day ceasefire coinciding with the end of World War II celebration in May, although many believe this to merely be an attempt to get certain sanctions lifted. More tangible was the minerals deals concluded between the US and Ukraine, while perhaps symbolically, the US approved $50m worth of ammunition sales to the country. European gas prices continued its decline by a further 21,0% in April, bringing the price movement year to date to -34,3%.

US headline inflation eased to 2,4% from 2,8% y-o-y in March, while core inflation also slowed to 2,8%. Producer prices printed at 2,7%, below forecasts. Data for the US personal consumption expenditure price index (PCE) declined to 2,3%, while the annual rate for core PCE (the Fed’s preferred measure of inflation) also decreased to 2,6%. US consumer surveys showed ongoing deterioration in the near-term outlook. The University of Michigan survey showed a meaningful downturn in consumer sentiment in April, while one year inflation expectations jumped to 6,5%, the highest since 1981. Inflation for the Euro area eased to 2,2% y-o-y in March from 2,3% the previous month. The European Central Bank (ECB) cut the policy rate by 25bps, reflecting on inflation prints that are nearing the 2% inflation target. The central bank also noted a weaker growth outlook given medium-term risks, easing expectations for future interest rate cuts. UK inflation printed at 2,6% in March from 2,8% the previous month, paving the way for another interest rate cut. Chinese inflation printed at -0,1% over the year, an improvement from the -0,7% the prior month, while core inflation printed at 0,5%. Producer prices continued to languish in deflationary territory, falling by 2,5% y-o-y in March.

Global sovereign bonds gained over the month, with the Bloomberg Global Aggregate Bond index returning 2,9%, driven by markets outside the US, notably European bonds. This brings the returns year to date to 5,7%. The tumultuous backdrop saw safe havens in vogue. Gold gained 5,3% in April, reaching new intramonth highs above $3500, with returns year to date now at 25,3%. The Japanese yen and Euro gained against the US dollar. The US dollar depreciated 4,6% in April, bringing the decline year to date to 8,3% on a trade weighted basis.

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