May 2018

• Global markets were mixed in May 2018 as rising U.S. interest rates, dollar strength and political uncertainty in Europe weighed on sentiment.
• Emerging markets experienced increased volatility and capital outflows.
• U.S. equities remained relatively resilient due to strong corporate earnings.
• European markets were pressured by political developments in Italy.
• Oil prices remained elevated despite increased volatility.
• Bond markets reflected growing concerns regarding tighter financial conditions globally.

Asia (ex. Japan)

Asian equities outside Japan weakened during May as rising U.S. interest rates and a stronger dollar pressured regional currencies and capital flows. Chinese markets remained volatile amid ongoing trade negotiations with the United States.

India and Southeast Asian markets experienced increased pressure due to higher oil prices and external financing concerns, while technology exporters remained relatively resilient.

Europe

European equities declined during May as political uncertainty in Italy unsettled financial markets and widened peripheral bond spreads. Banking stocks were particularly affected by rising concerns regarding eurozone political stability.

Despite political volatility, underlying economic growth remained supportive though slightly softer than earlier in the year.

United States

U.S. equities remained relatively stable during May as strong earnings and economic growth offset concerns surrounding trade tensions and rising interest rates.

The Federal Reserve continued signalling gradual tightening, while Treasury yields briefly rose above key psychological levels before stabilising.

United Kingdom

UK equities delivered mixed performance as global uncertainty and Brexit negotiations continued influencing sentiment. Rising oil prices supported energy-related sectors.

The Bank of England left interest rates unchanged after softer economic data, while sterling remained volatile due to political developments.

Japan

Japanese equities weakened modestly during May due to trade concerns and global volatility. Exporters remained sensitive to currency fluctuations and changing global demand expectations.

The Bank of Japan maintained accommodative monetary policies amid subdued inflation conditions.

Emerging Markets

Emerging markets experienced significant pressure in May as rising U.S. rates and dollar strength triggered capital outflows across several economies.

Countries with weaker external balances, including Turkey and Argentina, experienced heightened volatility, while Asia remained relatively more stable overall.

Commodities

Commodity prices were mixed during May. Oil prices remained elevated due to geopolitical concerns and supply risks.

Industrial metals weakened modestly amid trade concerns and softer Chinese demand expectations, while gold prices remained subdued.