April 2024 - The U.S. stock market shifts into reverse

5 mins

Stock markets and the economy

Publié le 06/05/2024 Mis à jour le 17/05/2024

The North American stock markets shifted into reverse rather abruptly in April. They had been rising since the start of the year on expectations that the main central banks, including the U.S. Federal Reserve, would cut their interest rates in 2024, and that the U.S. economy would pull off a soft landing. But investors’ hopes were dashed by the release of economic data showing that the U.S. economy was slowing amid persistent inflationary pressures. These developments fuelled concerns that the Federal Reserve would keep interest rates higher for longer.

	Closing 30-04-24	Variation vs 31-03-24	Variation vs 31-12-23
Interest rate in Canada (%)
Key rate
Key rate	5.00	0.00	0.00
Commodities ($US)
Oil (WTI)
Oil (WTI)	$83.49	-0.6% ▼	16.1% ▲
Currencies
EUR/CAD
EUR/CAD	1.47	0.4% ▲	0.5% ▲
JPY/CAD
JPY/CAD	0.01	-2.5% ▼	-6.9% ▼
USD/CAD
USD/CAD	1.37	1.4% ▲	3.9% ▲

Sources: Bank of Canada, U.S. Energy Information Administration.

CANADIAN MARKET

-1.8% (S&P/TSX Composite 30-04-2024)

The Canadian market was strongly influenced by the economic data from its neighbour to the south. Investors now expect the Bank of Canada’s rate cuts to begin later. The S&P/TSX Composite Index ended the month with a return of -1.8%. All sectors were down, with the exception of energy and materials.

The Canadian bond market was affected by the readjusted expectations of rate cuts, with the FTSE Canada Universe Bond Index returning -2.0% on the month.

AMERICAN MARKET

-2.6% (S&P 500 30-04-2024 in CAD)

The U.S. market struggled in April before recovering slightly toward month-end. Core inflation in the United States rose at a faster-than-expected pace, marking the first quarterly acceleration in a year, while GDP grew at an annualized rate of 1.6% in the first quarter, falling short of all economists’ forecasts. As investors came to terms with the idea that high interest rates may last longer than expected, the S&P 500 Index recorded its worst monthly performance since September 2023, returning -4.1% in U.S. dollars. The strong greenback mitigated the loss somewhat for Canadian investors, reducing it to -2.6%. The information technology and health care sectors detracted the most from the return.

EUROPEAN MARKET

-0.2% (MSCI Europe 30-04-2024 in CAD)

The European market was almost unscathed in relation to its counterparts on this side of the Atlantic. Even though investors in the euro zone and the United Kingdom also had to adjust their expectations of rate cuts, the negative impact on the equity markets was less pronounced. The MSCI Europe Index returned -0.6% in local currencies and -0.2% in Canadian dollars. The energy sector recorded the largest gains, while the information technology sector suffered the largest losses.

ASIAN MARKET

0.1% (MSCI AC Asia-Pacific 30-04-2024 in CAD)

The Asian market was fairly stable in April. The MSCI All Country Asia Pacific Index ended the month with a return of 0.4% in local currencies and 0.1% in Canadian dollars. From a regional perspective, solid performances by China and India helped offset the decline on the Japanese market. From a sectoral perspective, financials and communication services contributed the most to the return, while information technology recorded the largest losses.

EMERGING MARKETS

2.0% (MSCI Emerging Markets 30-04-2024 in CAD)

Emerging markets outperformed developed markets during the month. The MSCI Emerging Markets Index was up 1.4% in local currencies and 2.0% in Canadian currency. The return was driven mainly by China (including Hong Kong), where first-quarter economic growth exceeded forecasts. Despite the many challenges facing the Chinese economy, the data sparked a slight uptick in optimism among investors, both domestic and foreign. Even so, South Korea and the information technology sector were affected by the decline on the U.S. market.

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Sources: Bank of Canada, FTSE International Limited, S&P Dow Jones Indices LLC and MSCI Inc.

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