Like last month, May again showed minor upsets in the financial markets. However, there were some noteworthy issues, but they were evidently already priced in. From home came the news that the Future Pension Act (Wtp) was approved by the Senate. In the US, the banking sector was back in the spotlight at the beginning of the month following JP Morgan’s acquisition of First Republic Bank. Later, attention shifted to the US debt ceiling; failure to reach an agreement here would technically bankrupt the US. Markets breathed a sigh of relief after the agreement at the end of the month. France was downgraded by credit rating agency Fitch, but this had no significant effect on the price of French government bonds. Commodities got a little cheaper in May and the euro edged lower against major currencies.
Shares
The MSCI All Countries World Index rose 2.4% (measured in euros) in May, mainly due to the lower exchange rate of the euro. Emerging markets (+1.8%) lagged slightly behind developed markets (+2.5%). Within developed markets, the results were mixed: Pacific excluding Japan (-2.6%) and Europe (-2.5%) yielded; North America (+3.9%) and Japan (+5.5%) were the winners. The same picture was seen in emerging markets. Here it ranged between -2.6% for the EMEA region and +2.7% for Latin America. This month, energy was the least performing sector and IT was the leader. ‘Growth’ outperformed ‘value’.
Bonds
Compared to April, Europe saw a different picture in the interest rate market than the US. The German 10-year rate fell slightly by 0.03% to 2.28%, as did the Dutch 10-year rate (to 2.66%). In the U.S., however, 10-year rates rose 0.23% to 3.64%. Risk premiums again barely moved last month. The premium for less risky corporate bonds rose 0.08% to 1.69%, about the same as more risky corporate bonds (+0.10% to 5.10%). In contrast, emerging market government bonds fell slightly (-0.06% to 4.77)%.