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Market Summary – May 2019

20th May 2019

The Author: David Cooper

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Financial strategist, investment adviser and Sales Director for United Advisers

April World Equity markets strong once again

World equities generally performed well during April with Japan experiencing a particularly strong 5% rise going into the Golden Week holiday, extended this year to incorporate the installation of the new Emperor.

Strong upward surge for European equities as consumers keep spending

Led by Germany, European equities saw robust increases in April. Buoyant consumer spending and falling unemployment offset poor manufacturing numbers and alleviated some causes for concern across the continent, suggesting that the Eurozone, as a whole, may avoid a recession.

While developed Europe once again drove positive returns, the EU’s emerging markets lagged, returning a modest +2% overall, with many showing negative returns on the month.

Brexit delays cause UK markets to tread water

The Brexit deadline of 29th March passed and was delayed until 31st October, leaving investors in limbo, with no guidance about what might happen next.

With Theresa May starting talks to find a compromise deal with the Labour Party, speculation turned to her possible resignation and other scenarios to resolve the domestic political deadlock preventing an agreement with the EU.

UK equities, top performers in recent months, and ahead of their EU counterparts for much of the past six months, suffered as a result, underperforming the Eurozone in April.

US Equities give a strong positive return

April GDP data showing an upward trend for Q1 of 2019 somewhat calmed Investor trepidation catalysed by US GDP slowdown towards the end of 2018. Combined with falling unemployment and robust consumer spending, this led to US equities giving a relatively healthy positive return, albeit a return eclipsed by Japan.

China’s growth stabilises providing emerging markets with solid gains

Chinese GDP growth, at 6.4% year-on-year, exceeded expectations, affording emerging markets a welcome positive surprise in April.

A Politburo statement following their 19th April meeting removed previous comments about stabilisation of employment, and indicated China would further “supply-side reforms” and “structural deleveraging”.

This indicates that, with growth concerns potentially diminishing, China may be primed to shift focus from emergency economic stimulus back towards structural reforms.

Currency

Sterling mostly held its value against the Dollar and Euro in April and reclaimed some ground against the main Asian currencies.

The perception that a delay in Brexit makes a no-deal exit less likely, coupled with comments from Mark Carney about interest rate rises coming sooner than expected, helped to support the Pound.

The Dollar similarly performed well against the Yen and Renminbi.