Global markets fell across all major regions, driven by ongoing concerns around global growth.
Economic data was broadly underwhelming during May. The S&P 500 Index returned -6.6% for the month, the second-worst May return since the 1960s. US-China trade negotiations broke down as the US government increased the tariff rate on $200B of Chinese goods – China responded by increasing tariffs on $60B of US imports. President Trump additionally announced his intentions to impose a new tariff of 5% on all Mexican imports in a bid to force Mexico’s government to act on border security and migration.
Australian markets outperformed world markets, with the S&P/ASX 300 returning 1.7% in May as investors responded positively to the surprise Coalition victory in the federal election. Further supporting investor sentiment, the Reserve Bank of Australia (RBA) indicated it would cut the official cash rate to 1.25% after 32 months on hold. US-China trade talks spilled into rare earth elements, with Australia’s biggest rare earth miner Lynas Corporation gaining 54% over the month.
Australian large caps stocks (2.8%) outperformed the broader market, while mid-caps (-0.6%) and small caps (-1.3%) lagged. Telecommunications (7.1%) was the best performing sector, as Telstra announced it was progressing plans to cut costs. Financials (2.6%) also bounced back following the Coalition’s win. The Consumer Staples (-4.2%) and IT sectors (-3.1%) underperformed over May. The Energy sector (-3.8%) also lagged on the back of a further slide in the oil price.
The Australian Dollar (AUD) depreciated against most major trading partners over the month, falling against the USD (-1.6%), the Yen (-4.0%) and the Euro (-1.0%). Brexit concerns – UK Prime Minister Theresa May announced her resignation as Brexit talks concluded without agreement – saw the AUD appreciate against the Pound (1.8%).
Bond yields fell across most developed nations on increased concern around the outlook for economic growth. The Australian 10-year yield ended the month at 1.5%. The US 10-year yield fell to 2.1%, the UK 10-year yield declined to 0.9%, and the Euro 10-year yield fell back into negative territory to end the month at -0.2%.
Past performance is not an indication of future performance.
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