MACRO ENVIRONMENT
The US labour market exceeded expectations in May, adding 272,000 nonfarm payroll jobs compared to economists’ forecast of 180,000. Key sectors driving this growth included government, heath care, leisure, and hospitality which accounted for over 80% of all jobs created in the past year. However, the unemployment rate saw a slight uptick from 3.9% in April to 4%, marking the highest level in 2.5 years. On the inflation front, both core and headline figures decreased to 3.6% and 3.4%, respectively. If this trend continues, it may bolster the case for potential rate cuts in the US in the coming months.
In the UK, the economy expanded during the first quarter of 2024, with Gross Domestic Product (GDP) growth rising by 0.6%, surpassing market expectations and pulling the country out of a technical recession. Inflation fell sharply to 2.3%, the lowest since September 2021, driven by a reduction in the Office of Gas and Electricity Markets (Ofgem) energy price cap, although services inflation remained stubbornly high. Adding to the economic landscape, Prime Minister Rishi Sunak called for a general election on July 4, which will put the economy under further scrutiny.
In Europe, headline inflation rose to 2.6% in May from 2.4% in April, while growth indicators remained steady throughout the month.
EQUITIES
Global equity markets experienced a strong rebound in May, fuelled by robust corporate earnings and ongoing excitement for artificial intelligence. Most of the major indices posted positive returns, with the Nasdaq, Dow Jones and S&P 500 reaching all-time highs, gaining 7.0%, 2.6% and 5.0%, respectively. Notably, more than half of the S&P 500’s returns were attributed to four major tech stocks: Nvidia (+26%), Apple (+13%), Microsoft (+6.8%) and Alphabet (+6%). The technology and utility sectors led the gains, up 10% and 8.5% respectively, while the energy sector declined by 0.4% due to falling oil prices, and consumer discretionary up only 0.3% amid concerns over consumer spending.
The UK equity market also performed well, with the FTSE 100 reaching all-time highs, up 2.1% for the month. Industrials and financial (insurers and banks) sectors led the gains, driven by encouraging GDP data and declining inflation. Similarly, the European stock market hit record highs, with real estate, utilities, and financials leading the way reflecting the Eurozone’s optimistic outlook regarding potential rate cuts.
FIXED INCOME
Fixed Income had a positive but volatile month. Bond markets began strongly, buoyed up by Federal Reserve comments on interest rates and US job growth data indicating a slowdown. However, the rally was short lived, as better than expected economic data and concerns around inflation emerged mid-month. The US 2-year fell 0.16% to 4.8% while the 10-year fell 0,18% to 4.5%, maintaining the inverted yield curve.
COMMODITIES & CURRENCIES
Gold prices saw a modest increase for the third consecutive month, rising 2% month on month to $2,348. Although gains were more subdued compared to March and April, the precious metal reached a new all-time high of $2,427 per ounce mid-month before retreating, likely due to profit taking by investors.
In the energy sector, crude oil fell by 6%, marking its worst performance since November, while global benchmark brent crude declined 7.1%. In contrast, natural gas saw a significant increase.
The British Pound strengthened by 2.08% against the US Dollar, with the GBP/USD exchange rate ending the month at 1.27 vs 1.25 at the beginning of the month.
