Market Review May


The FTSE All-Share Index lost 3.0% in sterling terms during May. Along with global stocks in general, UK equities were hit by an escalation in the trade war between the US and China. The pound fell against most currencies as the UK government failed to make progress in reaching a parliamentary consensus on Brexit; cross-party talks with the Labour party fell apart and Prime Minister Theresa May announced plans to step down in June. Official data showed the UK economy grew by 0.5% over the first quarter versus the 0.2% pace of the prior quarter, an improvement that was attributed to Brexit-related stockpiling by manufacturers earlier in the year. In terms of sectors, fixed line telecommunications (-13.9%) and oil equipment, services & distribution (-13.7%) lagged, while leisure good (6.6%) outperformed.

FTSE All-Share Total Return (TR) GBP (%)*


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The FTSE World Europe ex-UK Index fell 1.7% in sterling terms over the month. While European stocks were hit by the intensifying trade war between the US and China, returns from European equities for UK investors were supported by a fall in the pound. Survey data suggested the eurozone manufacturing sector contracted further in May, following a decline in April. Nevertheless, monthly data also showed the eurozone services sector had continued to expand. The Ifo institute gauge of German business confidence fell to its lowest level in over four years. At the same time, official data showed the German economy grew by 0.4% during the first quarter versus the flat reading of the prior quarter, quelling fears that the country was heading into imminent recession. The EU issued a fresh warning over Italy’s spending plans given the country’s growing debt levels.

FTSE World Europe ex UK TR GBP (%)*


The FTSE All-World North America Index lost 3.0% in sterling terms over May. An escalating US/China trade war weighed on stocks, distinguishing the US as one of the world’s weakest-performing markets over the month. The Trump administration increased import tariffs to 25% on $200bn of Chinese important and mooted plans to hike tariffs by the same amount on a further $300bn of Chinese goods, as trade talks between the two side faltered. China retaliated by raising tariffs on $60bn on US important. US equities were further roiled towards month-end after President Trump warned the administration would also impose tariffs on Mexican important from early June unless Mexico took decisive action to stem illegal immigration into the US. Economic data released during the month was mixed, with industrial output and retail sales unexpectedly declining in April.

FTSE All-World North America TR GBP (%)*

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*Source: Lipper to 31 May 2019, total return. Indices rebased to zero at 30 April 2019.

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