Global equities moved higher in May, with the MSCI World Index gaining 4.5% for the month, as resilient earnings and continued strength in technology-related sectors supported investor sentiment. The weakest sector was energy as oil prices dropped burt remained elevated. The dominant driver remained the global buildout of artificial intelligence (AI) infrastructure. That sustained strong demand for semiconductors and reinforced expectations for ongoing corporate profit growth. Shares of Micron gained +88%, United Microelectronics gained +70%, and AMD gained +46%, among others. Also in Europe technology companies like Infineon gained strongly. 

On macroeconomic front news wasn't that rosy however. Due to the ongoing closure of the Strait of Hormuz the oil price remained elevated and pushed inflation considerably higher globally. Although WTI oil futures dropped a solid 16% in May, it still closed at $87,36 per barrel. In the United States inflation on a year-over-year basis grew from 2,4% in February (before the war) to 3,3% in March, to 3,8% in April, the highest since June 2023. And further inflation growth is expected in May. In the Eurozone inflation on a year-over-year basis grew from 1,9% in February to 2,6% in March, to 3,0% in April, the highest since October 2023. This puts pressure on central banks to raise interest rates which in turn should pressure on the stock market. Several European Central Bank (ECB) policymakers warned that higher energy prices are starting to fuel broader inflation and may mean the ECB will need to raise interest rates at its meeting in June.

The Michigan Consumer Sentiment indicator came in at just 44,8, the lowest level by far ever!

Lowest during COVID was 50,0. During the 2007-2009 crisis it never fell below 50. Even during the 1980 oil crisis – a situation most comparable to the current Iran conflict - the lowest level was 51,7. Ironically the 44,8 reading came on the same day that the Dow Jones and S&P500 stock indices hit an all-time-high.

But, despite the ongoing Iran conflict and soaring inflation, stock markets generally climbed, driven by a strong performance in the technology sector. The Dow Jones, S&P500 and Nasdaq Composite indices gained 2,78%, 5,15% and 8,36% respectively. The dollar ganied a modest 0,61% to 1,1660$/EUR.

In Europe the DAX, CAC and Eurostoxx indices also gained, adding 3,34%, 0,84% and 2,87% respectively. Slovenia's SBITOP gained a modest 0,83% and UK's FTSE index gained just 0,29% with the pound Sterling depreciating by 0,45% against the Euro.

In Asia the Nikkei gained a strong 11,88%. Although the Middle East situation remained highly uncertain, the market was supported by growing hopes for a resolution to the conflict, which underpinned investor sentiment.

The Hong Kong Hang Seng index dropped 2,30%. China also lagged the index against the backdrop of mixed economic data, weakness from internet stocks and less direct exposure to the AI-driven rally that dominated this month.

Precious metals had little change with gold futures dropping 2,10% to 4532 dollars per ounce.

Rudy Marchant

Fund manager OTP Skladi

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