While the Silicon Valley Bank induced market turmoil largely subsided come April 2023, the factors behind the whole event appeared to linger as the share prices of other regional banks swung wildly on a daily basis. But importantly for Europe the main focal point for potential contagion, namely Swiss banking giant Credit Suisse, remained in damage limitation mode as the merger with UBS seemingly progressed well as details emerged of the radical restructuring that would take place in the coming months. While nervousness remained, the stricter regulatory limitations placed on European banks post the last financial crisis appeared to be reaping dividends.
Likewise, that other bugbear of equity markets, inflation, also showed some very tentative signs of easing, although the miniscule improvements witnessed in some areas of the world did require a certain degree of optimism to get too excited about. In the US for example, core CPI showed a minor improvement month on month for March coming in at +0.4%. While clearly still in an upward trajectory, and just as the market had expected, it was better than the previous months +0.5% and therefore remained supportive of the close to peak narrative. Less supportive was OPEC’s decision to cut oil production by over 1 million barrels per day. While largely unexpected the dramatic drops we have seen in energy prices in recent months didn’t make the move too surprising.
April also saw the beginning of the first quarter 2023 reporting season. While too early to draw any concrete conclusions, our first tentative observation would be that, for industrial sectors in particular, there is some evidence of a volume slowdown, but in many instances pricing remains firm meaning profitability and market expectations can be met. The consumer still appears resilient with the luxury goods sector in particular demonstrating still robust growth thanks in a large part to the reopening of the Chinese economy.