Our latest monthly investment & economic update for April 2022 looks at how the global investment markets, economy, and commodities perform.
The FTSE 100 index of leading UK company shares closed at the end of March at 7,515.68 points, up 57.43 points or 0.77%.
The investment & economic update for European markets ended March relatively stable as investors waited for news of US jobs data.
Analysts in the US expect 470,000 new jobs in March, following the addition of 680,000 a month earlier.
Brent crude oil futures reached $103.81 a barrel at the start of April. Gold was $1,942.15 an ounce. £1 buys $1.3125 or €1.1858.
Rising employment and falling unemployment will give the US Federal Reserve more headroom to focus its monetary tightening efforts on rising prices.
Still, a robust jobs market could also contribute to further inflationary pressures.
Despite a positive month the investment & economic update for London companies, European shares recorded their first quarterly loss in two years, with retail stocks experiencing a particularly tough end to the month.
Retail stocks in Europe lost 5% on the month’s final day, their worst daily performance in more than two years. Weak profit reporting and higher costs are impacting retailers.
Market risk remains elevated due to the ongoing Russian invasion of Ukraine. Renewed peace talks this week created temporary optimism. Still, hopes for peace faded after Ukrainian President Volodymyr Zelenskyy said his forces expect renewed Russian attacks in the country’s southeast.
Russian President Vladimir Putin signed a decree forcing foreign buyers of Russian gas to pay in roubles from 1st April, claiming Russia would immediately halt contracts if countries did not make payments in the Russian currency.
Western governments face a difficult decision; pay in roubles or lose access to a critical energy supply. More than a third of Europe’s gas supply comes from Russia, and Germany has already implemented an emergency plan that could ration energy supplies.
Countering the impact of Russian interference in global energy markets, the US said it was considering a significant release from its Strategic Petroleum Reserve, placing some downward pressure on an already elevated oil price.
The International Energy Agency (IEA) is also holding an emergency meeting to discuss a new release of strategic reserves to dampen soaring oil prices.
The start of April sees an unwelcome rise in energy prices for millions of households in the UK, following a £700 a year increase in the OFGEM energy price cap.
The 54% price cap increase will result in a typical energy bill of £1,971 a year, further fueling already high price inflation.
Further inflationary pressures are likely to come from rising wages in the UK, with the latest Lloyds Bank Business Barometer survey finding half of the firms plan to raise average pay by at least 2% in the next twelve months. A fifth of larger businesses plan to boost pay by more than 5%.
And more than half of the 1,200 UK firms surveyed said they are likely to raise their prices for consumers.
The latest official figures show UK price inflation, as measured by the Consumer Prices Index (CPI), rising to 6.2% for the twelve months to February. It’s the highest CPI inflation rate since March 1992 and rose from 5.5% a month earlier.
The Bank of England is responding to rising prices by hiking interest rates at three successive Monetary Policy Committee meetings. The Bank Rate now stands at 0.75%, up from its historic low of 0.1%, with further interest rate increases expected in 2022.
However, further monetary tightening could be more modest than first expected due to the likely economic impact of Russia’s invasion of Ukraine.
Despite rising interest rates and a cost of living crisis, average UK house prices rose at their fastest pace in more than 17 years in March.
According to lender Nationwide, annual house price growth reached 14.3%, its highest since November 2004.
Due to robust demand and limited supply, house prices are rising, supported by a strong jobs market and relatively low interest rates.
“March saw a further acceleration in annual house price growth to 14.3%, the strongest pace of increase since November 2004. Prices rose by 1.1% month-on-month, after taking account of seasonal effects, the eighth consecutive monthly increase.
“The price of a typical UK home climbed to a new record high of £265,312, with prices increasing by over £33,000 in the past year. Prices are now 21% higher than before the pandemic struck in early 2020.
“The housing market has retained a surprising amount of momentum given the mounting pressure on household budgets and the steady rise in borrowing costs. The number of mortgages approved for house purchase remained high in February at around 71,000, nearly 10% above pre-pandemic levels. A combination of robust demand and limited stock of homes on the market has kept upward pressure on prices
“Wales remained the strongest performing region with house prices up 15.3% year-on-year, down slightly from 15.8% in the previous quarter”.