A recap of market movements in MayGlobal share markets (or equities) as a whole gained in May although regional performance was mixed. Economic data remained broadly supportive but European politics and fears of a trade war weighed on some markets.
US equities advanced in May with the S&P500 gaining 2.4%. During the month, the Trump administration confirmed that it would go ahead with tariffs on steel and aluminium imported from Canada, Mexico and the EU, and also withdrew from the Iran nuclear deal. The more combative stance stoked fears of retaliation from major trade partners, which could lead to a fully-fledged trade war. However, the positive tone set by economic data and corporate earnings over the month allowed markets to largely shrug off these concerns and stay ahead overall.
Eurozone equities ended May in the red with the Bloomberg European 500 returning -0.1%. Political ructions in Italy dominated the headlines. The populist Five Star Movement and the League appeared close to forming a government but then the Italian President blocked the appointment of a Eurosceptic finance minister proposed by the two parties. Fears of a snap election triggered a decline in Italian shares and bonds, although the two parties rekindled coalition talks by the end of the month. Political risk also affected Spain with Prime Minister Rajoy facing a vote of no confidence in early June.
The Chinese share market had a positive month with the Shanghai Stock Exchange Composite Index ending the month up 0.7%. Strong economic data and the impending inclusion of Chinese shares in MSCI emerging markets (benchmarking) indices provided a tail wind.
Emerging markets (EM) equities as a whole posted negative returns in May. A wall of worries (including a strong US Dollar, a potential de-synchronisation of global growth, political and trade uncertainties) proved too hard for EM equities to climb. The MSCI Emerging Markets Index closed the month down -2.4% (in local currencies).
Over the ditch, the Australian Stock Exchange 200 Index notched up a 1.3% return. Resource stocks (i.e. companies in the mining and materials sectors) continued to perform strongly. However, further revelations from the Royal Commission Enquiry into financial services in Australia continued to weigh on the shares of banks.
Back home and the local market produced another solid month with the NZX50 Gross Index gaining 2.5% over the month. This return means the New Zealand share market is the top performing market that we follow in this newsletter year to date. Early in the month the RBNZ made it very clear that it had no intention of moving interest rates any time soon. This is in direct contrast to countries such as the US, the UK and Canada, which are all likely to hike interest rates in the coming months. The fact that interest rates are likely to be relatively steady in NZ makes our dividend heavy share market more attractive. This provided a tailwind for the local market in May.
|
