June's Market Review

The world’s major equity markets generally ended May in positive territory, buoyed by some favourable economic data and by the news Petro Poroshenko had won a solid victory in Ukraine’s presidential elections. In the UK, for example, the month saw the FTSE 100 index reach its highest level for 14 years, boosted by encouraging economic data and high levels of corporate activity.

Although the US-based Pfizer decided to abandon its controversial bid for fellow pharmaceutical giant AstraZeneca, Lloyds Banking Group revealed a scheme to float 25% of its stake in TSB, retailers Dixons and Carphone Warehouse announced “a merger of equals” and property website Zoopla set out its floatation plans. Over May as a whole, the FTSE 100 index rose by 1%.

Investors shrugged off the news the US economy had shrunk at an annualised rate of 1% during the first quarter of 2014 to drive the major US equity indices to new heights over May. The economy’s contraction was blamed primarily on exceptionally wintry weather. Minutes from the US Federal Reserve’s April meeting indicated policymakers were starting to debate a strategy to increase interest rates. Nevertheless, the Fed took pains to emphasise that the discussion did not imply an imminent rate rise. The Dow Jones Industrial Average index rose 0.8% during May.

Newsflow in Europe was dominated during May by the European Parliamentary elections and indeed the euro’s value was undermined by strengthening support for anti-establishment parties. Share prices in Germany rose, however, following an overall victory for Angela Merkel’s Christian Democratic Union and its sister party, the Christian Social Union, with the country’s Dax index rising 3.5% over May as a whole. 

The eurozone’s rate of economic growth decelerated during the first quarter of 2014. As a whole, the bloc expanded by a relatively lacklustre quarterly rate of 0.2%, unchanged from the previous quarter. Germany’s economy grew by 0.8% while, in comparison, France’s economy stagnated during the period, dampened by weak domestic demand. France’s CAC 40 index rose 0.7% over May as a whole.

In Japan, retail sales registered a sharp annualised decline of 4.4% during April, as a higher rate of consumption tax took effect. The increase in tax stoked Japan’s rate of inflation, which surged during April at an annualised rate of 3.2%. Nevertheless, the Nikkei 225 index rose 2.3% during May – its first monthly gain since December 2013.

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Tags: CAC 40Dow Jones Industrial Averageeconomic dataEquity MarketsEurozoneFederal ReserveFTSE 100Nikkei 225US economy

Categories: Market Review

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