Weekly market review around the world: 26 – 30 May

26 – 30 May 2008

Europe
There are growing inflationary fears in the Eurozone, and with economic data suggesting it has grown to its historic peak of 3.6 percent. Negative market sentiment grew following news that both the services and manufacturing Purchasing Managers Index (PMI) had fallen to 50.6 and 50.5 respectively, moving closer to the critical 50 mark which indicates a contracting economy. Nevertheless gains were made over the week as the German Dax saw a gain of 2.2 percent while France’s CAC 40 was up 1.6 percent.

US
First quarter GDP figures were more positive than expected. Further, new home sales rose by 3 percent in April, while the durable goods report (-0.5 percent) questioned the extent to which business investments are perceived to be deteriorating. Against this backdrop, the S&P closed up 1.8 percent, while the NASDAQ rose by 3.2 percent.

UK
In the UK, housing market fears continue to dominate the headlines. Data for the month of May showed a further 2.5 percent fall, bringing the year on year rate to a 4.4 percent decline. Subsequently, the FTSE All-Share closed down 0.5 percent.

Japan
Japanese equity markets moved in line with the US throughout the week, enjoying sound gains over the week. The Topix index climbed by 2.3 percent and the Nikkei 225 Average rose 2.3 percent, ending the month of May up by 3.5 percent. This is the second straight monthly gain in a row in Japan.

Asia & Developing Markets
Equity markets in Asia were mixed. Hong Kong’s Hang Seng fell by 0.7 percent, while in contrast, the Hong Kong China Enterprises index of Chinese stocks listed in Hong Kong closed up 1 percent.

Elsewhere, India’s Sensex finished down 1.4 percent, while Taiwan’s market also suffered a decline of 2.4 percent.

Brazil’s Bovespa rose by 1.6 percent and Mexico’s Bolsa gained 2.9 percent as Latin American equities had a broadly positive week.

Bonds
Global government bonds tumbled to multi-month lows, as a broad retreat in commodity prices failed to dispel concerns among investors about mounting inflationary pressures.

The yield on the 10-year US Treasury bond touched 4.14 percent, the highest since December, while the 10-year German Bund and the 10-year Japanese government bond yields hit 10-month highs during the week.

Currencies
The US dollar regained some ground from the losses of the week before, rallying against the euro following concerns over eurozone inflation and worrying signs of weakness elsewhere – notably a drop in German retail sales and the first rise in German unemployment for two years.  

The Japanese yen sank to a three-month low against the dollar, as investors were encouraged by rising equity markets in Japan.
As of the end of May, all the major currencies are at virtually unchanged levels against the dollar.

Commodities
Prices staged a significant retreat over the week. NYMEX West Texas Intermediate, the benchmark US oil price, fell by USD 5 in volatile trade, while gold hit a two-week low of USD 870 an ounce and copper fell below USD 8,000 a tonne for the first time in two months.

For further information, or to discuss how current global economic conditions are affecting your savings, pensions or investments, please feel free to contact Craig Welsh at Spectrum IFA Group or visit www.expatfinance.nl.

This commentary was compiled with the assistance of BlackRock, one of the world’s leading investment management groups.