April 2021 Market Wrap

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The US Dollar Index ended April on a high on the back of upbeat macroeconomic data releases. The Fed left interest rates and the pace of asset purchases unchanged despite acknowledging an uptick in economic activity as the market recovers. In Eurozone, GDP contracted 0.6% in Q1, indicating a second technical recession in over a year. Despite unemployment rates remaining at 8.1%, better than expected, European stocks closed lower, and EUR slid against USD.

Across the Atlantic, Bank of Japan left interest rates unchanged as expected and revised its growth forecast of the fiscal year ending Mar 2021 upwards, citing stronger than expected demand. However, inflation rates continue to fall short of forecasts despite a multitude of stimulus and monetary easing packages. JPY fell to near three-week lows against the dollar on the continued positive USD momentum.

In other notable news – China Huarong, one of China’s largest state-owned asset manager and a major issuer of offshore debt, missed the March 31st deadline for its 2020 Annual Reports, leading to a major sell off across Asian bond markets. Investors were spooked by its financial health and cast doubt over the willingness of Beijing to step in; they were reassured after ICBC reportedly stepped in with a loan to help repay a maturing SGD 600 million bond. Analysts are wary of more potential bond defaults in the horizon given China’s push to tighten credit and to remove the implicit backing behind its state-owned entities.

Still in China, Beijing has placed wide-ranging restrictions on the financial platforms of 13 well-known internet companies – including Tencent and ByteDance – as regulators looked to rein in the country’s tech giants, trying to discourage monopolistic behavior and to prevent “disorderly expansion of capital”.

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