Global equity markets performed well in March as they recovered from the initial shock caused by the Russian invasion of Ukraine. The MSCI World index, which measures global developed market equities, picked up 3.11% in local currency terms. Nevertheless volatility remained high, with the VIX index peaking at its highest level since January 2021.

Inflation

Inflation figures continued to rise in March, in particular due to soaring fuel prices, with the UK Consumer Prices Index reaching a 30 year high of 6.2%. The Bank of England voted to increase the UK’s base interest rate for the third time since December and it returned to its pre-pandemic level of 0.75%. The latest forecasts from the Office for Budget Responsibility (OBR), which accompanied the Chancellor’s Spring Statement, showed that inflation is expected to rise as high as 8.7% in late 2022, before dropping to 4% in 2023. The UK economic growth forecast for 2022 was revised downwards from 6% to 3.8%.

Full round-up of March market performance

In the UK, the FTSE 100 index gained 1.42%, while medium and smaller companies, measured by the FTSE 250 ex IT index and the FTSE Small Cap ex IT index respectively, returned -0.10% and 0.58%. In the US, the S&P 500 USD index rose 3.71% while in Europe the Eurostoxx 50 EUR index slipped 0.43%. Japanese stocks measured by the Topix JPY index climbed 4.30%.

Emerging markets returns were mixed, with the MSCI Emerging Markets index losing 2.03% in local currency terms. Indian stocks measured by the Nifty 50 INR index gained 3.99% and Latin American equities, measured by the MSCI Latin America local currency index, jumped 6.64%, but Chinese equities measured by the MSCI China local index slumped 7.73%.

In the fixed income market, UK government bonds, measured by the FTSE Gilts All Stocks index, dropped 2.11%, with long dated (over 15 years to maturity) gilts losing 3.28%. Sterling denominated corporate bonds, measured by the Markit iBoxx Sterling Corporates index, were down 0.95%. In the high yield market, the Bank of America Merrill Lynch Sterling High Yield index ended the month flat.

There were positive returns in the commodities market. The S&P GSCI USD index, which consists of a basket of commodities including oil, metals and agricultural items, picked up 9.63%. This included the ongoing surge in oil prices, as crude oil futures rose a further 4.76% during the month. In the agricultural markets, corn and wheat futures amassed 7.35% and 8.41% in USD respectively, while in the precious metals markets, the S&P GSCI Gold and Silver indices gathered 2.65% and 3.19% in USD respectively.

In the currency markets, it was a mixed negative month for the pound as it depreciated 2.10% against the US dollar and 0.74% versus the euro but gained 3.61% against the yen.