Beverly Chandler, Opalesque London: The latest "Early View" from FRM, Man Group’s $16.7bn fund of hedge funds and managed accounts business, finds that investors entered April on the back of a strong first quarter for risk
assets, supported by capital inflows into equities and a more benign
economic landscape. For FRM there was concern that markets
would follow the pattern of the previous three years, with a setback
in the second quarter due to the re-emergence of economic issues.
"Our view has been that a possible catalyst for a
Q2 correction would be a slowdown in the US growth story. Two
core US economic indicators missed expectations in April – the
change in non-farm payrolls at the beginning of the month (88k vs.
expected 190k) and Q1 GDP towards the end of the month
(annualised 2.5% vs. expected 3%), but equity markets finished in
positive territory, as the S&P 500 Index returned 1.8% during the
The firm believes that the equity market resilience was driven by renewed
sentiment around the willingness of central banks to provide markets
with liquidity. "Explicitly, the aggressive monetary policy of the
Japanese central bank led to the Nikkei rising by 11.8%, taking its
YTD return to 33.3%, and other developed markets’ indices
benefited by contagion. Implicitly, breakeven inflation in the US
dropped substantially during April. It had been
steadily increasing over 2013 leading to concerns over the potential......................
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