The beginning of April saw the continued trade skirmish between the US and China. The fear of an all-out trade war was abated as the Trump administration and Beijing indicated they¶re willing to negotiate. Despite the soft start for asset prices this year and ongoing trade tensions, investors still believe solid expansion for 2018 while acknowledging the risks of slippage have mounted. Sentiment is still at historically healthy levels, US earnings are relatively strong, and China growth has accelerated, keeping the global expansion intact in the second quarter. 2018 should produce strong and synchronised global growth, but activity and survey readings are challenging the outlook.

As the market digested the notion of what a trade war means for markets, the MSCI World index delivered 1.15% in dollars and 6.57% in rands. Emerging equity markets delivered -0.43% in dollars and 4.91% in rands. The US 10-year yield pushed 21 bps higher over the month, and settled at 2.96% at month end. The sell-off across developed market bonds was largely driven by concerns that inflation expectations are on the rise. Subsequently, the JP Morgan Global Aggregate index was weaker, delivering -1.47% in dollars and 3.81% in rands. Similarly, developing market bonds delivered -1.53% in dollars and 3.74% in rands, marginally underperforming their developed market counterparts. The EPRA/NAREIT Developed Markets Property index delivered 2.01% in dollars and 7.47% in rands, as global listed property rerated with the dividend yield rallying 7 bps to 4.12% at month end.

The rand traded weaker against key developed currencies, as the market focused on the US and China trade tariff dispute and rising tensions between the US and Syria. As such, the rand depreciated by 5.09% relative to the dollar in April. The local equity market rallied some 5.40% in rands while from a sector perspective, the Resi-20 index delivered 9.37%, the Indi-25 returned 5.79% and the Fini-15 delivered 3.01%. Rand-hedge industrial and resource companies were the largest beneficiaries during April. In terms of the contribution to total return for the local equity market, Naspers (1.03%), BHP Billiton (0.90%), and Richemont (0.88%) drove the market return. With the US 10-year yield having now flirted with 3%, the prospect of a higher rates regime for the US entails a lot more volatility and pressure on developing market currencies and bond yields. As such, the SA 10-year yield was 17 bps higher and settled at 8.38% at month end. Subsequently, the ALBI delivered -0.70% in rands and -5.75% in dollars. Local inflation-linked bonds underperformed their sovereign counterparts and delivered some -3.02% in rands and -7.96% in dollars with inflation firmly inside the SARB¶s range of 3-6%. The local property market rerated over the month of April with strong gains in Greenbay, Nepi Rockcastle, Fortress B, and Resilient. The SAPY returned 7.68% in rands and 2.20% in dollars. With the exception of Nepi Rockcastle, the aforementioned property companies each rallied in excess of 30% in absolute terms. Furthermore, SA cash delivered 0.58% in rands and -4.54% in dollars.