Monthly Wrap – The DAX Stole the Show in April

The Majors

That was quite a month for the major bourses, as April once more delivered for the bulls.

The trailblazer through April was the DAX30, which surged by 7.1%. A distant second was the Nikkei 225, which rallied by 4.97%. The NASDAQ and CAC40 ended the month a little further back, with gains of 4.74% and 4.41% respectively.

Surprisingly, the worst performer in the month was the CSI300, which gained just 1.06%. It’s worth noting that, year-to-date, the CSI300 was up a whopping 30%. A distant second was the NASDAQ, which was up 22% year-to-date to the end of April.

For the U.S markets, the month of April was a less spectacular one. While the NASDAQ led the way, the Dow and S&P500 gained 2.56% and 3.93% respectively. Year-to-date, the Dow gained 14%, while the S&P500 ended the month up 17.5%.

The European Market Forces,

The gains in the European majors came in spite of some quite woeful economic indicators released over the course of the month.

Private sector PMI numbers for both March and April raised the greatest concern over the Eurozone economy.

EU economic powerhouse Germany saw its beloved manufacturing sector contract through the quarter. The manufacturing PMI fell from 51.5 in December to 44.5 in April, according to prelim figures.

Export orders were on the slide as the effects of the ongoing trade war between the U.S and China weighed. Slower economic growth globally was another factor.

In spite of the dire numbers, GDP numbers out of the Eurozone impressed on Tuesday. Eurozone growth had, in fact, accelerated through the 1^st quarter.

The GDP numbers supported the EUR’s return to $1.12 levels after a brief visit to $1.113 levels last week.

Driving the European majors have been a combination of hopes of a resolution to the U.S China trade war, corporate earnings and a shift in sentiment towards FED monetary policy.

Curveballs

The European majors may not be out of the woods just yet. The threat of U.S tariffs on EU goods remains. U.S-EU trade terms may well take the spotlight once the U.S moves on from China.

On top of the threat of tariffs, Brexit will also be a factor through the 2^nd quarter. The British government will be looking to close out a deal before the EU Parliamentary elections later this month.

While the threat of a no deal departure will be on ice until Halloween, a lack of progress will begin to test the UK’s economic resilience.

Trade terms between the EU and the UK are important for both sides and any deterioration in the UK economic environment would be another blow for the EU economy.

The 1^st quarter wasn’t as bad as the markets had feared, but whether growth can be sustained remains to be seen.

Both the IMF and the ECB slashed growth forecasts for the year.

Looking Ahead

May is traditionally a sell-off month for the major indexes. This time around, dovish central bank chatter, corporate earnings, and economic data could deliver a trend-bucking month.

It may ultimately boil down to whether the U.S and China can ink a trade agreement that the market buys into…

Whatever happens, the European majors are unlikely to continue the upward swing if the U.S majors hit reverse.

Should corporate earnings out of the U.S continue to provide support, things would have to be quite catastrophic for the European majors to slide back.

Expect the EUR to have some influence and of course, the FED…