Monthly market update: May 2024

A photo of a screen showing a graph charting stock market returns

Global shares rose in May with developed markets outperforming emerging markets. Investors continued to anticipate interest rate cuts, albeit with US cuts likely to come later than in some other regions. Oil prices retreated in the month.


US shares posted gains in May, supported by some strong corporate earnings and hopes that interest rate cuts are still on the way later this year.

The equity market advance was led by the information technology, utilities, and communication services sectors. Energy was the main laggard amid weaker oil prices. Some of the “Magnificent Seven” stocks performed well in the month amid strong earnings and high demand for artificial intelligence-related technologies.

Data released in the month showed inflation remaining sticky at levels above the Federal Reserve’s (Fed) 2% target. Fed chair Jay Powell said that there had been a “lack of progress” on bringing inflation down, but that interest rate rises were unlikely.

The Fed’s preferred measure of inflation – the core Personal Consumption Expenditures Index – came in at 2.8% for April. This followed in the wake of data earlier in the month showing inflation as measured by the Consumer Prices Index had dipped to 3.4% in April from 3.5% in March.

Elsewhere, there were some signs of moderation in the US economy. Non-farm payrolls data showed that 175,000 jobs were added in April, below consensus expectations.


Eurozone stocks advanced with the real estate and utilities sectors among the top gainers. These sectors drew support as investors looked ahead to the European Central Bank (ECB) meeting in June where a rate cut is widely anticipated. Financials were also strong. Energy and consumer discretionary were the weakest sectors. Lower oil prices weighed on the energy sector while within consumer discretionary there was some weakness among luxury goods and automotive stocks.

Data showed that eurozone annual inflation, as measured by the CPI, increased to 2.6% in May from 2.4% in April. Nevertheless, investors continued to expect a 25 basis point rate cut when the ECB meets on 6 June. However, the timing of further rate cuts remains uncertain.

Labour market data in Germany showed wages growing at the fastest pace in nearly a decade, with collectively agreed wages up 6.3% in Q1 2024. Forward-looking data also pointed towards economic recovery. The flash HCOB eurozone Purchasing Managers’ Index (PMI) for May reached a 12-month high of 52.3. PMI data is based on surveys of companies in the manufacturing and service sectors. A reading above 50 indicates growth while below 50 indicates contraction.


UK equities rose over the period and the FTSE 100 achieved fresh all-time highs. In line with recent trends, financials and industrials were the top contributors. Small and mid-sized equities performed very strongly amid a flurry of new bids and on hopes of a possible turning point for the domestically focused areas of the UK market.

Having suffered a mild recession over the second half of 2023, it was confirmed the UK economy rebounded strongly in the first quarter of 2024, recording Gross Domestic Product growth of 0.6%. The positive surprise on the growth front was tempered by news of a lower-than-expected decline in annual CPI inflation in April to 2.3%. This pushed out the timing for the first expected rate cut by the Bank of England (BoE).

Prime minister Rishi Sunak fired the starting pistol for the race to form the next government, by calling a general election to be held on 4 July.

Meanwhile, it was reported that bid activity for UK-listed companies this year has hit its highest level since 2018, driven by overseas buyers. This helped to add to hopes that the UK equity market may be at a turning point in terms of how it is perceived by international investors following years of underperformance.


The Japanese equity market experienced a rebound in May, with the TOPIX generating a total return of 1.2%. However, the Nikkei 225 index continued to underperform compared to the broader market TOPIX, primarily due to the weakness of large-cap technology stocks.

Sectors such as automotive and domestic-oriented retailers also underperformed. The financial sector outperformed, driven by the rise in long-term interest rates in Japan. Despite some weakness in US economic indicators, the Japanese yen remained weaker against the US dollar.

The persistently weak Japanese yen and conservative earnings guidance from companies for this fiscal year weighed on market sentiment. However, full-year earnings results were stronger than expected, showcasing sales growth, pricing power, and cost control across various sectors.

An increasing number of companies announced their commitment to the Tokyo Stock Exchange’s initiatives, focusing on the cost of capital and share price. This has led to a record-high amount of share buybacks in the new fiscal year. In just two months – April and May – the total amount of announced share buybacks by Japanese companies reached 6.5 trillion yen, which is already 67% of the total share buybacks during the whole previous fiscal year. Generally, companies that announced their renewed capital allocation plans received a positive stock price reaction.

Although there are no clear signs of a recovery in consumer sentiment or real wage growth, the labour market remains tight, and gradual wage increases are expected to support consumption in the coming months. Additionally, the record-high number of inbound tourists is anticipated to contribute to the economic recovery.

Asia (ex-Japan)

Asia ex-Japan equities achieved modest gains in May. Taiwan, Singapore, and Malaysia were the best-performing markets, while Indonesia, Philippines, and South Korea were the worst-performing markets in the MSCI AC Asia ex-Japan Index in May. Mainland China and Hong Kong also ended the month in positive territory as higher-than-expected first-quarter economic growth helped boost investor sentiment towards Chinese stocks.

Stocks in Taiwan achieved robust gains in May, driven by ongoing investor enthusiasm for AI developments. Chip makers that provide the chips used in many AI technologies achieved strong gains as AI becomes the driving force of a new global industrial revolution.

Indian stocks also achieved modest growth in May as many overseas investors seeking exposure to emerging markets switch their attention to India’s fast-growing economy and away from China. Stocks in South Korea were weaker in the month amid growing investor caution over the global economy and the timing of US interest rate cuts.

Emerging markets

Emerging market equities rose in US dollar terms although they lagged developed market peers. Softer US macroeconomic data helped ease concerns about the timing of US interest rate hikes while better performance from Mainland China also supported emerging market returns. Lower energy prices weighed on some of the Middle Eastern markets.

Egypt was the top-performing market in the month, followed by Czech Republic. Colombia was up as the central bank reduced interest rates to 11.75% while Turkey posted its first monthly gains in some time, aided by currency strength and strong earnings results from one of its larger index constituents.

In Chile, which outperformed, currency strength was also beneficial, as was a 50 basis-point cut to interest rates which brought them to 6%. Taiwan was also ahead of the index, supported by returns in the tech sector, as was Peru and Poland. The latter was boosted by some strong company results announced in the month.

Mainland China outperformed on optimism about authorities’ support for the housing sector and President Xi’s reform rhetoric. India was only just ahead of the index. National elections, which began mid-April, are due to finish in early June with the incumbent President Narendra Modi expected to win a third term in office, although it seems possible he will lead a coalition government.

South Africa posted flat returns in US dollar terms, ending the month behind the index on investor concern ahead of national elections, which took place on 29 May. The results saw the ruling African National Congress party losing its parliamentary majority having secured only 40% of the national vote.

Greece, Thailand, and Mexico all delivered negative returns with the Mexican market also influenced by the general election held in early June. Korea lagged the index on foreign equity selling while the 7.1% decline in the price of Brent crude oil affected the likes of UAE, Qatar, and Saudi Arabia, all of which underperformed broader emerging market peers. Brazil ended the month in negative territory following flooding in the southern state of Rio Grande do Sul.

Global bonds

Government bond markets diverged in May. US Treasury yields fell from their year-to-date highs, outperforming European markets where yields crept higher (yields move inversely to prices). Positive inflation data, signs of weaker growth, and softer labour market indicators supported US bonds. US Fed chair Jerome Powell maintained an easing bias, hinting that rate hikes remained unlikely.

Renewed confidence in the Fed lowering interest rates later this year supported credit markets. US investment-grade corporates outperformed European markets on a total return basis, although positive excess returns over governments were similar across regions as spreads tightened. On a sector basis, spreads between financials and non-financials compressed further during the month, driven by comparably lower supply amid a constructive economic backdrop. Both US and European high yield fared well. (High-yield bonds are more speculative compared to their investment-grade counterparts that are the highest quality bonds as determined by a credit rating agency. High-yield bonds carry a credit rating below investment grade.)

Concerns of the US labour market overheating eased as data revealed job openings falling to a three-year low and voluntary job departures falling to near four-year low. Softer-than-expected non-farm payrolls, a fall in oil prices and a modest miss on inflation caused the market to price in a higher possibility of rate cuts later in the year.

In the UK, prime minister Rishi Sunak unexpectedly announced that a general election would take place on 4 July. Meanwhile, the outcome of May’s BoE Monetary Policy Committee meeting was interpreted as relatively dovish by the market, with deputy governor Ramsden joining one other in voting for a rate cut this time around. However, disappointing news on the progress of inflation drove a sell-off in gilts later in the month, with higher-than-expected prints in both the headline and core measures.

The news on eurozone inflation was equally as disappointing, adding upward pressure on yields. May’s preliminary inflation release showed higher-than-expected core inflation, driven by the service sector.

The US dollar weakened against all G10 currencies due to softer rate expectations.

The FTSE Global Focus convertible bond index rose by 1.4%, showing convertibles lacked some of their traditional participation in equity market upside. The primary market in convertibles was very active in May. A Chinese internet platform raised a record-breaking $4.5 billion in a seven-year convertible structure. The recent stock market rally has generated interest in convertibles. Momentum in convertible valuations in Europe and Japan, however, seems to be ebbing off.


The S&P GSCI Index fell in May. Energy and livestock were the weakest components of the index, while agriculture, industrial metals, and precious metals achieved modest gains. In energy, the price of unleaded gasoline recorded a significant decline, while crude oil, Brent crude, heating oil, and gas oil also fell in the month. Conversely, the price of natural gas rose sharply in the month.

In agriculture, wheat prices achieved robust gains, while rises for soybeans and coffee were more muted. Cotton and sugar prices both declined in the month. In industrial metals, all sub-components ended the month in positive territory, with aluminium and nickel achieving the biggest price gains. In precious metals, silver prices advanced strongly in May, while the price gain for gold was more modest.

Please note

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

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