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Global equities could receive April boost after a pause in rally

Published 04/01/2021, 08:40 AM
Updated 04/01/2021, 08:45 AM
© Reuters. FILE PHOTO: FILE PHOTO: A Specialist trader watches his chart while working on the floor of the New York Stock Exchange
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By Patturaja Murugaboopathy

(Reuters) - While the pace of the global equity rally has waned in recent weeks, world shares have a better chance of climbing again if history repeats itself.

MSCI's gauge of stocks across the globe has delivered an average gain of 2.6% in the month of April in the last 19 years, the highest compared with other months of the year.

It was followed by November's 1.7% gain and July's 1.1%, according to the data.

Graphic: MSCI World index's April gains https://fingfx.thomsonreuters.com/gfx/mkt/qmyvmreeypr/MSCI%20World%20April.png

"April tends to be a strong month for risk assets, with monthly returns statistically significant across major markets, said Andrew Sheets, a strategist at Morgan Stanley (NYSE:MS), adding that higher dividend payments could be a reason behind this rise in shares in the month.

"The April month could be an important tactical window for investors to take on beta, before heading into a possibly quieter summer period," he said.

The MSCI World index rose just 4.1% in the Jan-Mar quarter, the lowest in a year, as global shares were pressured by growing concerns about hiccups in vaccine rollouts and a fresh wave of coronavirus infections, particularly in Europe.

Some analysts said higher corporate profits could boost stock prices this month, with factories across Europe and Asia ramping up production in March.

Paul Sandhu, head of multi-asset quant solutions at BNP Paribas (OTC:BNPQY) Asset Management, said investors should take this pause in the rally as an opportunity to rebalance their portfolios and buy on dips this month.

Refinitiv data showed global companies' profits in the March quarter are expected to rise 70%, compared with a year ago, led by a recovery in energy, consumer and mining firms.

Graphic: Expected March quarter profit growth https://fingfx.thomsonreuters.com/gfx/mkt/dgkvleoozpb/Expected%20March%20quarter.jpg

"April should see good data, strong 1Q earnings, still-modest realised inflation and a pause in the yield move," said Morgan Stanley's Sheets.

© Reuters. FILE PHOTO: FILE PHOTO: A Specialist trader watches his chart while working on the floor of the New York Stock Exchange

The MSCI World index was up 0.24% on Thursday, which was the first trading day of the month.

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