April bucked the five-month upward trend for global equities. The MSCI All-Country World Equity index lost almost 3,5% of its value (in USD), as many developed markets registered monthly declines. However, equity indices remain well in positive territory since the beginning of the year, and well above (over 20%) their last lows in the autumn of 2023. Sector-wise, utility and energy stocks led for the month, whereas interest rate-sensitive sectors like real estate and information technology lagged. Investors were disturbed by the sticky inflation in the USA, as April was the third-straight month of higher-than-expected core CPI inflation (Consumer Price Index, excluding food and energy prices). This decimated all hopes that the Federal Reserve (Fed) would cut interest rates in the first half of 2024, and markets soured. The American economy continued to deliver mixed signals, with some strong employment and consumer spending data, but first-quarter GDP growth came out shorter than expected. Inflation figures in Europe, by contrast, were below expectations, especially in the United Kingdom, and this raised hopes that an interest rate cut was coming soon (or at least sooner than in the US). In Asia, the Chinese market rebounded strongly from its awful start of the year, rising 7% in April, while the Bank of Japan chose to keep interest rates unchanged (at +0.1%), faced with the yen hitting a 34-year low versus the US dollar; the USD continued to gain strength against the world’s currencies. Among commodities, oil dipped in April, aided by large US inventories and optimism over a resolution of the Gaza conflict, while gold notably rose. Fixed income markets were also affected by the changed expectations for later and smaller rate cuts by central banks – global bond prices fell 2,5% on average over the month (meaning that their yields rose).
      US equities had a tough April as hotter-than-expected inflation dampened hopes of near-term interest rates cuts. The three major US equity indices (S&P500, DJIA, and Nasdaq) lost between 4% and 5% in the month. Data showed that both, CPI and the Fed’s preferred measure of inflation, PCE – personal consumption expenditure – ticked higher in March.  Separate data showed an acceleration in labour costs and increased retail sales, both of which fuel inflation. The first quarter earnings season also saw many companies beat expectations, albeit against a low level. Meanwhile, GDP growth in Q1 was the weakest in almost two years: at 1,6% (annualized), it was weaker than the expected 2,2%, and sharply lower from 3.4% in the previous, Q4 2023. The stubborn inflation and strong jobs market meant that investors significantly reshuffled their expectations for an interest cut from the Fed. Currently, June and July cuts are highly unlikely, and the total number of cuts expected in 2024 has fallen from around six or seven quarter-of-a-percentage-point cuts at the beginning of the year to just one or two before the year end. Thus, given their sensitivity to interest rates, the real estate sector and U.S. small-cap stocks fell the most in April; Utilities fared the best among the S&P500 stocks.  Higher-for-longer rates pull bond prices lower. The 2-year US Treasury yields rose 40 basis points (bps) to 5.0%, while the 10-year Treasury yield rose to 4.7%, keeping the yield curve’s slope inverted (inverted yield curve is considered a harbinger of an economic recession).
      European shares also had a difficult month of April, although they outperformed their US counterparts. The pan-European STOXX600 index shed just 1,5% off of its value, buoyed by the UK market, which was the top performing developed equity market for the month. Along with the significant undervaluation at which the UK stocks currently sell (of up to 50% lower P/E ratios compared to US stocks), the April result was aided by the fact that the UK’s equity market is more heavily weighted towards financials, healthcare and resources (materials) sectors, which gained through the month. Across the continental exchanges, which registered declines similar to the US, the worst performing sectors included information technology and consumer discretionary, while energy and real estate were among the top performers. One positive news that the Eurozone’s composite purchasing managers’ index (PMI) reached an 11-month high of 51.4 for April, significantly above the December recessionary level of 47.6 (a reading above 50 indicates growth; below 50 – contraction). The improved growth prospects together with favorable inflation data in Europe help to offset the still high geopolitical risks in the region (wars in Ukraine and Gaza). The Eurozone’s annual inflation stood unchanged in April at 2.4%; core inflation slowed to 2.7%. Furthermore, in Q1 the Eurozone economy grew by 0.3% q/q, following a -0.1% GDP decline in Q4 and a recession in 2H 2023. Both developments suggest the European Central Bank is probably on track to cut interest rates on June 6th – and now only two cuts are priced-in by year-end. While European government bond yields rose over the month (the German 10-year Bund to 2.58%), Europe’s periphery markets outperformed. During the month there was some speculation about a potential downgrade of France’s public debt quality, but rating agencies Moody’s and Fitch kept it unchanged, soothing markets. 
       April was not a bad month for the Bulgarian stocks. The flagship SOFIX index, the broad BGBX40, and the small-cap one, beamX, all posted small gains for the month, which, against the backdrop of the large declines in international markets, emphasizes the diversification advantage of the domestic market in a global portfolio. During the month, trading began on the BSE's newest segment, EuroBridge, which allows trading of Bulgarian stocks also on the XETRA market, one of the two main markets of the German Deutsche Bӧrse. Shares of our technology champion Shelly Group AD became the first to trade on this new segment. Thus, for the month among Bulgarian companies the best performer (with a sharp reversal from the previous month) was the commercial bank First Investment Bank AD, whose price rose by almost 15% in April, and the worst – the diversified holding company Doverie United Holding AD, whose shares fell by more than 5%.