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Market View

Market View: April

March provided investors with a dose of optimism. Global stock markets rallied, providing the tonic many people needed after months of relentless investment volatility.
 
The FTSE 100 lifted thanks to a strong performance of shares held by mining companies, and a rise in metal and oil prices raised confidence. The market was also boosted by further monetary stimulus from the European Central Bank and the gentle dovish tone from the Federal Reserve Bank in the US.
 
Janet Yellen, Chair of the US Federal Reserve, helped maintain a positive momentum with her suggestion that the US should ‘proceed cautiously’ with regard to any future interest rate rises, suggesting a rate raise in April was unlikely. US economic growth for the final quarter of 2015 had been revised upwards to 1.4%, with the economy overall estimated to have grown at 2.4% for the whole of 2015.
 
The Bank of Japan intervened in currencies by selling the Yen, and the Chinese National People's Congress announced increased stimulus measures.
 
Emerging markets and commodities had a strong month, and they similarly benefited from the softened tones coming from the US. Key commodities including oil and iron ore continued to recover ground. Brazil made a marked recovery too, benefiting from the potential impeachment and likely removal of the current president, Dilma Rousseff and her predecessor Luiz InĂ¡cio Lula da Silva, who have been engulfed in allegations of corruption. 
 
George Osborne’s Budget had the potential to create economic uncertainty, but it did not cause waves of disruption in the UK. What did happen was that London’s benchmark share index rose, but shares in soft-drinks makers fell after George Osborne announced a sugar levy. 
 
Even the news that Tata Steel was pulling out of the UK couldn't dent the FTSE 100, closing up more than 1% on the day that the story broke. By the end of the month the outlook for Tata UK and its UK employees looked bleak with the Prime Minister hosting a cabinet committee and desperately looking for a buyer.
 
Yet, whilst stock markets may have enjoyed calmer territories in March, the global outlook remained pessimistic. The International Monetary Fund warned that the world faces ‘economic derailment’ with the Chinese economic slowdown being attributed to the blame. Credit ratings agency, Moody’s, cut the outlook for China from ‘stable’ to ‘negative.’
 
In the European economy there are some concerns that the European Central Bank’s stimulus package is starting to falter, despite the fact that unemployment across the whole Eurozone came down to 10.3%. Falling energy prices meant that the Eurozone stayed locked in deflation, with consumer prices down for the second consecutive month. The European Central Bank cut interest rates into negative territory against the backdrop of the fragile global economy.
 
There are also the growing concerns over the UK’s referendum and its decision whether or not to stay in Europe. The Brexit vote is fast approaching and those campaigning to stay in are warning of a downgrade in UK economic growth, should the UK decide to leave. This is inevitably creating an underlying sense of nervousness. 
 
So, whilst the month of March painted a picture of buoyancy for investors, it didn't manage to gloss over the underlying global economic issues. The FTSE-100 index closed at the end of March at 6,175. 

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