May saw the UK economy take a further step forward, with indoor dining and hotels reopening from the middle of the month. There was also more positive news for the UK with over 70% of adults having now received their first vaccination. May also saw geopolitical news come to the headlines again with the rising tensions between Israel and Palestine, as well as the arrest of the Belarusian journalist Roman Protasevich. Both these incidents caused international concern but did not impact stock markets.
The month saw reduced levels of volatility in European and UK markets, following broadly positive earnings from both regions with the FTSE 100 up 1.08% and EuroSTOXX up 2.70%. The US market saw higher levels of volatility as the inflation question continued throughout May, with sharp falls and rises depending on the economic data being released. Even though the ride wasn’t smooth, the S&P 500 finished the month up 0.65%.
The inflation question is still dominating US markets and looks like this will continue for the rest of the year, with a key focus on the unemployment rate. President Biden also announced his $5tn federal budget proposal for the next 5 years, which again should be positive for the US economy and is on top of the $6tn stimulus announced over the last 12 months. Emerging markets saw some volatility following an increase in COVID cases across regions, however the markets still finished 1.35% high, even after a 4% fall in the first 2 weeks of May.
Fixed Interest markets were similar to that seen in April, with less volatility than at the start of the year. The US 10-year Treasury fell to 1.62% from 1.65%, with it staying between 1.56% and 1.69% over the month. The UK 10-year Gilt finished the month flat at 0.80%.