Monthly review end-April 2020

  • 18 May 2020
  • 5 mins reading

In April, support measures aimed at mitigating the Covid-19 pandemic led to stock prices rising from the deepest falls that they had posted in March. At the same time, the demand for and price of lower-risk rated government bonds continued to rise, but at a slower pace than had been recorded in mid- to late-March.


UK equities staged a partial recovery in April, much as was the case in many other global equity markets. Investors favoured robustly financed companies that appeared to have good growth prospects as well as a reasonable chance of delivering stable earnings. Utilities and technology stocks were among the winners.


Economic data continued to illustrate the severity of the lockdown in April. US initial jobless claims totalled over 20 million for April alone, and the tally since the beginning of the Covid-19 outbreak is over 30 million. Economic growth in the US was down by 4.8% in the first three months of 2020, as measured in gross domestic product. Even so, the S&P 500 registered its strongest rally in 30 years following unprecedented stimulus delivery and signs of lockdown-easing in some states and in Europe. However, it must be noted that the index remained considerably lower than its starting price at the beginning of the year.


After a sharp fall in the first quarter, eurozone equities fared better in April. Towards the end of the month, various European countries began either to loosen lockdowns or to outline how economic activity might resume over the coming months. The energy sector posted a negative return as oil prices remained under pressure, but all other sectors delivered positive returns. Preliminary data showed that the region’s economy contracted by 3.8% in the first three months of 2020 compared to the last three months of 2019.

Elsewhere, fresh financial stimulus from major central banks and signs of stabilisation in new Covid-19 cases in the US and Europe, improved sentiment more widely, enabling stocks in southeast Asia to recover some losses as well. But Chinese stocks didn’t keep up. They were catching up on declines after having performed relatively well in March.


With nervousness abounding, investors were seeking lower-risk rated opportunities in which to put money. This increased the demand for and prices of benchmark 10-year government bonds in the US, UK and Germany. As the price of a bond rises, its yield falls. This meant that bond yields in all three instances were being pushed towards or into all-time lows.

The demand for and prices of corporate bonds was even greater than that of their government counterparts in April. This sent yields on global investment grade (lower risk) and high yield (higher risk) bonds down as investors calculated that financial support from governments and central banks would improve the ability of companies to meet their debt obligations.

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