It was a challenging week for markets across the world with many different factors affecting sentiment. Covid-related lockdowns in China has led investors to worry about the economic fallout China and supply chain consequences globally. In Europe, Macron’s victory provides some continuity in France and in the UK, the latest economic data reinforced a picture of stuttering economic growth.

US: Business activity slows but remains strong

Companies in the communication services suffered the most, with Netflix down 35% over the week as the company reported disappointing quarterly results. On the economic front, preliminary data for the manufacturing and services sector suggested that growth in business activity slowed in April but remained strong. Meanwhile the Federal Reserve, the US central bank, continues to make remarks that it would continue raising interest rates this year, and that it may do so more quickly.

Japan: Weakening currency and economy shows signs of pick-up

Japan’s stock markets rose modestly over the week. Inflation in Japan is lagging the rest of the developed world and remains the key reason why its central bank continues to be very supportive of its economy. The Japanese yen weakened to around two-decade low against the US Dollar: a weaker currency tends to benefit the economy by boosting the value of companies’ overseas earnings. The Japanese economy is showing signs of picking up as the severe coronavirus situation is easing.

China: Economy grows more than expected but lockdowns hamper sentiment

Chinese markets slid as investors worried about the economic fallout from coronavirus lockdowns. China’s economy grew at a stronger-than-expected 4.8% pace in the first three months of the year compared to a year ago, up from 4.0% at the end of 2021. However, the International Monetary Fund cut China’s 2022 growth forecast in its latest outlook and warned that China’s economy could slow more than currently projected and have supply chain consequences for Asia and beyond.

Europe: Central bank becomes more ‘hawkish’ and Macron triumphs

Shares fell amid ongoing concerns about the war in Ukraine and increased hawkishness of the central bank. When a central bank is ‘hawkish,’ they are in essence considering raising interest rates to combat inflation. Business activity accelerated in April, driven by quicker growth in the services sector as economies emerged from lockdowns. Emmanuel Macron’s election victory will mean continuity in economic and foreign policy and will come as a relief to investors and to the EU and NATO allies.

UK: Retail sales, consumer confidence and business activity in the limelight

Storm clouds gathered over the UK economy, with falling high street sales (retail sales fell in March), plunging consumer confidence (which has fallen to a near all-time low due to soaring cost of living) and rapidly cooling business activity (business activity grew at the slowest rate in three months in April). According to the International Monetary Fund, the UK will be the worst performing G7 economy next year with the cost of living crisis and tax increases projected to slow economic activity to a crawl.

The Omnis Managed funds, Openwork Graphene Model Portfolios and Omnis Managed Portfolio Service provide you with a diversified asset allocation in line with your Attitude to Risk, investing in Developed Market Equities, such as UK, US, Europe and Asia Pacific as well as Emerging Market equities.  Cautious and Balanced investors will also have significant holdings in UK and Global Bonds, as well as Alternative Strategies.  We believe this multi-asset approach aims to minimise global equity market falls in volatile periods.  Past performance is not a guide to future performance.  The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations.  You may not get back the amount you originally invested.

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