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April 2021 economic review

| Market Forces

Economies around the world started to reopen and vaccine rollout plans gathered momentum during April, with the remarkable economic growth expectations at the start of the year coming to fruition.

Developed market recovery

The developed world looks well on its way to recovery and the coming months should see remarkable economic data. The focus will now be on the degree to which inflationary pressures are as transitory as central bankers are flagging, or whether the growth will translate to more persistent price increases. Across the world, the impact of Covid-19 has meant that policymakers have worked to provide massive levels of support to financial markets. The challenge is now for central banks is to convince markets that they will continue to provide support, even when the global economy is thriving.

Climate change

In April we saw the focus shift back to concerns over climate change and the environment. The spotlight was once again on emission reduction targets, this time with many countries issuing new commitments. President Biden announced the US would target a 50% reduction by 2030, relative to 2005 levels, while the UK declared it would target reducing emissions by 78% by 2035, relative to 1990 levels. China’s premier, Xi Jinping, also said that China’s coal consumption would peak in 2025.

Japan and the US – supply shift

During April Japan and US leaders met in order to discuss a supply chain deal on the supply of critical computer chips. The visit came on the back of a global shortage of semiconductors that has squeezed US automakers and other manufacturers, forcing them to cut production. The issue has become important for policymakers, who worry about economic and security risks from the shortage. The leaders agreed to spend more on research and development, particularly relating to new generations of mobile telephony.


The US posted solid gains in April, as investment sentiment was supported not only by a combination of positive economic and policy conditions but also by the robust earnings season. Q1 GDP growth came in at 6.4% (q/q), while US service providers experienced their fastest growth on records dating back to 1997, as the composite purchasing managers’ index (PMI) climbed to a record 59.7.

Despite the pace of the economic recovery, US President Joe Biden proceeded with policies to implement fiscal stimulus. This follows Biden’s $2.3 trillion infrastructure plan (American Jobs Plan), funded from corporate tax increases and a $1.8 trillion family support plan (American Families Plan) funded from higher taxes on the wealthiest Americans.

In terms of inflation, one of the major focus points for the second half of the year will be to what extent the rise in US inflation is ‘transitory’, as the Fed has pre-emptively labelled it.


Stocks in the Eurozone region also gained during April, with real estate, consumer staples and technology among the top performers. Covid-19 infection rates still continued in several countries within the Eurozone, including Germany, where we saw the constitutional court reject an appeal against the EU recovery fund, which is set to be disbursed from July. Infection rates began to slow down in Italy, enabling the government to loosen restrictions in some regions. In continental Europe, after a difficult start to the vaccine campaign, rollout programs started to gain momentum.

GDP data showed the Eurozone economy declined by 0.6% q/q in Q1. Forward-looking data was more encouraging with the manufacturing PMI survey reaching a new record high of 63.4. The European Central Bank (ECB) had increased the pace of its asset purchases in March, due to the renewed wave of the virus. The ECB then announced in April that it would continue at this pace, in order to avoid a rise in borrowing costs that could place the economic recovery at risk.

Inflation remains more muted in the Eurozone. Estimates for April showed that headline inflation rose to 1.6% year-on-year (y/y) but the core measure remains subdued at 0.8% y/y.


UK equities performed well, led by small and mid-cap stocks as the FTSE 250 index hit all-time highs. Large oil and gas companies also underperformed during April, as did financials, although the latter bounced back at the end of the month. Mining stocks and domestically focused stocks led the positive performance.

In the UK Covid-19 cases remain at a low level, despite the relaxation of some restrictions. Now that an estimated 70% of adults have antibodies against the coronavirus, the UK should be on a sustainable path to reopening. As people in the UK start to venture out and the economic pace starts to quicken, we see both the manufacturing and services PMI surveys come in above 60 for April – an indication that the economy is rapidly growing.

Emerging markets

Emerging market (EM) equities recorded a gain in April aided by dollar weakness but underperformed developed markets. Covid-19 continues to be a concern in several EMs and thus returns were relatively muted.

The Covid-19 health crisis in India reached catastrophic levels in April, emphasizing the need for successful vaccination rollouts to be urgently expanded to the emerging world. Pressure on the health infrastructure has intensified and case fatality ratios have more than doubled since mid-February.

Asia ex-Japan equities recorded a modest gain in April as the rollout of Covid-19 vaccines in many parts of the world boosted optimism for a return to economic normality. China achieved a modest gain during the month following two consecutive monthly declines as solid 2020/21 earnings, a temporary weakening of the US dollar and less stretched valuations buoyed market sentiment. In the first quarter of the year the Chinese economy grew 0.6% q/q, as activity in services continues to improve. Looking forward, domestic consumption is predicted to be the major growth driver as fiscal and central bank authorities become more stable in their policy support. This could then translate to a tapering off in local government financing and infrastructure investment.

South Africa

During April Covid-19 infection rates in South Africa started to stabilise. Although numbers were encouraging for the month, vaccine rollout issues, possible new virus variants, and the country heading into winter/flu season mean people should remain cautious.

On the inflationary front, inflationary pressures are expected to remain subdued, despite the sharp increase in petrol prices and electricity tariffs. Economists also believe interest rates will remain low for the time being, noting that a large output gap, subdued credit growth and quiescent inflation will make it possible for the SA Reserve Bank to leave the repo rate unchanged at 3.5% until March 2022.

That said, South African economic data released during the month has been positive. The manufacturing industry in South Africa climbed to a nine-year high in April as new business and output grew strongly as a result of a sharp rebound from the Covid-19 impact. Retail sales were up 6.9% y/y in March and exports continued to surge, leaving SA with a R52 billion March trade surplus. The Markit PMI index improved from 50.3 in March 2021 to 53.7 in April as new business and output grew strongly to multi-year highs. Customer demand of businesses are also improving, and export demand recovering, as global markets recovered from the Covid-19 pandemic. In addition, April saw the business confidence index for South Africa improve sharply from 26.6% in February to 31.3% in March 2021.

Market performance:


Over the course of the last year most markets have made a remarkable recovery since hitting lows at the start of the pandemic. Developed market equities gained in April with the US leading the way, supported by a robust vaccine rollout and fiscal stimulus measures. The MSCI World Index gave South African investors 2.69% m/m in April and 13.09% y/y in rand terms. In dollar terms the MSCI World returned 4.52% for the month and 43.16% for the year to end April. Emerging market equities recorded a gain in April aided by dollar weakness but underperformed developed markets. Covid-19 continues to be a concern in several emerging market countries and thus returns were relatively muted. The MSCI Emerging Market Index returned 0.58% m/m in rand terms and 15.09% y/y to end April, and returned 2.37% for the month and 45.70% for the year to end April in dollar terms.


South African equity markets were no exception to the global market rally, with equities clocking in a sixth-consecutive monthly gain. In April the All Share Index (ALSI) produced a return of 0.97% m/m and 36.40% for the year to end April. This has been the longest winning streak for local equities in over six years.

The April gains were largely thanks to the diversified miners, with the resource sector returning 2.93% m/m and an extraordinary 59.79% for the past year. Industrials were down 1.35% m/m for April but still managed to return 23.04% on a yearly basis, while Financials recorded a solid 1.70% m/m and 23.42% for the year.

Property stocks had a stellar month, returning 11.68% m/m and 40.33% for the year to end April. The SA 10-year government bond yield followed global yields lower, ending April at 9.3%, and we saw the All Bond Index return 1.90% m/m and 14.68% for the year. The STeFI came in flat in April returning 0.30% m/m and a paltry 4.34% for the year.

The rand strengthened 26.59% against the US dollar, 15.18% against the euro and 15.33% relative to the sterling over the 12 months to end April. On a monthly basis the rand was up 1.78% relative to the US dollar, down 0.63% to the euro, and it strengthened 1.43% to the sterling.

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