April 2020 - Markets respond favourably to support measures

Market Reviews - Monthly Review

As scientists around the world search for a cure for COVID-19, the exceptional economic support measures began to have an impact on the main leading indicator: markets. Despite a still volatile and declining oil price during the month, the performance of the world’s stock markets injected some hope as to our future trajectory.

CANADIAN MARKET

The various programs put in place by the Bank of Canada allowed the bond market to function more normally and contributed to its positive return over the period. The significant narrowing of credit spreads caused corporate bonds to outperform. As for equities, only the Communication Services sector recorded a loss during the month. For the other sectors of the Canadian stock market, April offered a spectacular return to positive territory. The best-performing sectors were Materials, Information Technology, Consumer Discretionary and Energy. As measured by the MSCI Canada Index, the Canadian stock market rebounded with a return of 9.7% for the month.

U.S. MARKET

South of the border, the stock markets also welcomed the numerous measures to support the economy. The MSCI USA Index recorded the largest increase of all, rising 13.1% in local currency. However, when expressed in Canadian dollars, it ended up at 10.4% following a partial recovery of our currency against the greenback. All the sectors made a positive contribution, with more than half of them rising by double digits. Energy and Consumer Discretionary were particularly strong in April.

EUROPEAN MARKET

The European market also turned the tide, but to a lesser extent. Its rebound was more modest owing to the Energy sector, which continued to sink into the red. Overall, the performance on the other side of the Atlantic was a respectable gain of 5.7%, as represented by the MSCI Europe Index. The exchange rate effect also detracted from the return, which was reduced to 3.6% in Canadian currency. The most performing sectors were Information Technology, Health Care and Consumer Discretionary.

ASIAN MARKET

All sectors in Asia were in the green. Thanks to a strong comeback by the Energy sector and a positive contribution by Materials and Information Technology, the Asian markets were up 6.8% in local currency terms according to the MSCI Asia Pacific Benchmark Index. For Canadian investors, the return was slightly weaker at 5.6%, owing to the loonie’s appreciation against a number of Asia-Pacific currencies.

EMERGING MARKETS

As global equity markets rebounded in April, emerging countries found themselves in the middle of the pack. As measured by the MSCI Emerging Markets Index, they returned 8.8% in local currencies. Currency fluctuations slightly detracted from performance, such that the return was 6.6% in Canadian dollars. All sectors added value, but the ones that did best were Materials, Energy, Health Care and Industrials.

Sources: Bank of Canada and MSCI Inc.

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