European markets closed the quarter on a positive note, with the German DAX outperforming the FTSE100. While the latter closed 2.5% higher, the former finished 11.5% higher as it looked to eke out a monthly gain after headline inflation in the EU fell by more than expected in March. Basic resources and commercial real estate weighed down the FTSE100, while weakness in the banking sector affected Barclays and Standard Chartered. Another monthly decline in the Nationwide House price index added to the decline. However, Beazley and British Airways owner IAG were higher after receiving positive broker comments. In the US, markets looked set to end the week, month, and quarter on an upbeat note. The Nasdaq 100 has seen a strong quarter, rising close to 19%, but before getting too carried away, the reason for the outperformance is largely down to a poor performance in Q4 of last year. The pound was the best performer against its G7 counterparts and up over 2% against the US dollar, close to its highs for the last three months. The worst performers were the Norwegian Krone, on the back of weakness in oil and gas prices, while the Australian dollar has also underperformed. The euro pulled back from its recent highs after the latest headline CPI reading slowed more than expected in March.
The pandemic-induced volatility has been a recurring theme in Q1 2023, as it has had to deal with supply chain disruptions and labour shortages. Investors had to endure a month of whiplash-inducing volatility, as the last few days of March slowly chipped away at the losses, which happened in the early part of the month. The bulls had a huge bite taken out of them and are still licking their wounds. As we head into Q2, it is a pity that the UK government has seen fit to throw a bucket of cold water over the improvement with a raft of tax rises on businesses and taxpayers.
The recent economic data suggests an improvement in Q1, and the outlook for the UK economy has improved significantly. In the US, the weaker-than-expected core PCE number appeared to temper market expectations that the Fed will be forced to raise rates much more than their current levels. Meanwhile, chipmakers, including Micron Technology, are on the back foot, led by reports that China is opening a review of its products citing cybersecurity risks.
Netflix shares are slightly higher after announcing plans to cut its film output and streamline its business model. Virgin Orbit shares have plunged after the company announced it was laying off 85% of its staff and Sir Richard Branson injected £11m into the business. This is an attempt to find a buyer for a business that is struggling to continue as a going concern. Nikola shares are also lower after the truck maker said it was looking to raise $100m by way of a secondary share offering.
In commodities, the quarter has been difficult for crude oil prices. Expectations that a China reopening would serve to galvanise prices back to $100 a barrel proved to be unfounded. Additionally, the Norwegian Krone has underperformed on the back of weakness in oil and gas prices.
