General Market Review

Global shares rose in April. In the US, equity markets were supported by several positive earnings-related themes, including strong first quarter revenue and earnings in large cap technology companies and better than expected regional bank results. Three quarters of S&P 500 companies reporting earnings have exceeded analyst’s estimates. On the other hand, S&P 500 earnings are expected to contract in the coming quarters. European Equities have outperformed US equities, whereas Emerging Market Equities underperformed developed market equities.

In the US, inflation indicators have signaled that inflation rates may have found a plateau at elevated levels. The Personal Consumption Expenditures Index (PCE) eased to a year-on-year growth rate of +4.2% in March vs. a rate of 5.1% reported in the preceding month. The Consumer Price Index (CPI) increased by 5.0% (previous month 6%), while the Core CPI Index (excluding food and energy prices) increased by 5.6% year-on-year for the month of March (previous month 5.75%).

In the Euro Area both the Consumer Price Index CPI and the Core CPI Index have increased by 6.9% and 5.7% on a year-on-year basis for the month of March (previous month: 8.5% and 5.7%) and thereby showing some moderation.

In this environment the yield of U.S. 10-year Treasury notes and 10-year German Bunds were more or less rangebound throughout the month of April. At the end of the month the 10-year yield of US treasuries and German Bunds stood at 3.45%. and 2.3% respectively.

In the US the FED increased the FED funds rate by another 25 basis points. For the month of May the FED is expected to increase the Fed Funds Target Rate to 5.00%-5.25%. Afterwards, the FED is expected to pause. In Europe, the ECB is expected to increase the deposit rate and the main refinancing rate by another 25 bps to 3.25% and 3.75% respectively.


Energy and Transportation

In the beginning of the month energy shares have risen sharply after Saudi Arabia and other members of the OPEC+ group announced a surprise oil production cut of around 1.16 mn. barrels/ day. Thereafter, oil prices fell as demand for oil has cooled both in the US and China. The price of Brent Oil was more or less unchanged at $79.5 per barrel at month end compared to $79.8 at the end of March.

After a negative performance in the previous month energy stocks have posted a positive return in April. The Stoxx 600 Oil and Gas increased by +3,5%.

On the other hand, the transportation sector has underperformed the other market sectors. The Dow Jones Transport Average decreased by -2,9% in April. The shipping and aviation subsectors were in sync with the other transportation sectors. The Russell 2000 Marine Transportation fell by -2.7%, whereas the US Global Jets Index dropped by -3%.

Within the marine transportation segment Capesize-Rates increased from $ 14k/day to $19k/day by month end. In the container freight market, the SCFI (Shanghai Containerized Freight Index) was up by 14% versus four weeks ago and down by 75% year-on-year. On the other hand, crude tanker rates (VLCC – Very Large Crude Carrier) dropped from an average of $80k/day to an average of $52k/day. VLGC rates have averaged $ 53k/day versus an average of $ 65k/day in the previous month.

In the US Airline Sector earnings results for the first quarter were mixed. Delta Airlines first quarter earnings missed analyst estimates. However, booking trends for the summer are strong whereas United Airlines posted a narrowed than expected loss. The airline expects a profitable second quarter. Southwest Airlines reported a higher-than-expected loss for the 1st quarter due to disruption related operating expenses.


Fund Performance

The overall fund performance was neutral in the USD and slightly negative in the EUR denominated share classes. Short positions were able to contribute positively. The fund was able to benefit from long positions in the car carrier shipping sector and the utility energy segment. Moreover, individual short positions in transportation and the freight services sector have compensated for the losses in other segments. On the other hand, individual long positions within the tanker (Crude and Product) and dry bulk shipping segment have contributed negatively. Given the sell-off in selected marine shipping stocks individual shipping names are now trading at significant discounts to their Net-Asset-Values.


For more information you can find our latest Fact Sheet – April 2023.

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