Market Pulse - May 2023

Key themes

  • Global stock markets were down marginally, as losses in Europe and emerging markets were offset by gains in the US. The former were weighed down by slowing growth while the technology sector in the US benefited from positive sentiment around the expansion of artificial intelligence (AI).
  • The global macro backdrop in May continued to suggest that inflation remains sticky, but that the world economy may be entering a slowdown. The US Federal Reserve (Fed) and the European Central Bank (ECB) tightened at their May policy meetings, with both projected to hike rates further.
  • Bond markets were somewhat directionless, posting small gains overall. The US dollar rose against the euro, wiping out most of its losses this year as the Fed was seen as less likely to ease in 2023 compared to a month ago.

Markets snapshot

  • The MSCI AC World equity index fell by 0.2% (2.5% gain in euros) over May.
  • The MSCI USA was up by 0.7% (4.2% in euros) amid optimism on the AI theme.
  • European ex-UK equities declined by 2.1%.
  • The UK was the worst performer among major equity markets, falling by 5.2% (-3.2% in euros).
  • Bond markets were slightly higher in May, with the ICE BofA 5+ Year Euro Government bond index up by 0.5%. 10-year German bond yields fell, closing the month at 2.3%.
  • The US dollar rose by 3.5% against the euro in May, wiping out most of its losses this year as the Fed was seen as less likely to ease in 2023 compared to a month ago. The euro ended May at $1.0638, down from $1.1019 at end-April.
  • Commodities declined amid concerns of a slowdown in China, with copper down by 6.0% (-2.6% in euros) and Brent crude oil falling by 8.7% (-5.3% in euros).

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