Equity markets progressed again in May with the MSCI World Index up 2.2% for the month.

Investors are renewing focus on macro economic data and the outlook for economies post the recent company earnings reporting season. There seems to be increasing consensus that the global economy is not heading towards a 1930’s style global economic depression.

Markets are responding positively to the various “green shoots” that are emerging, hoping these indicate an imminent bottoming of the global and regional recessions. In particular, stronger than expected US consumer confidence figures during May were a primary driver of positive sentiment. However, this optimism was balanced with realism later in the month as US housing market data, where the downturn initially started, is not, as yet, showing any signs of recovery.

Emerging Markets had a strong performance in May with positive newsflow throughout the BRIC (Brazil, Russia, India & China) countries in particular. The Chinese authorities continue their assertion that they will spend their way out of the downturn through provision of multi billion dollar stimulus packages.

The Indian equity market rallied strongly as the country’s Congress Party’s election was seen as a major step towards favourable economic reform and supportive of future international investment in the region.

Brazil and Russia are both benefiting from rising commodity prices and a more favourable outlook in general for commodities and global trade. Oil and other commodity prices have risen strongly in recent weeks with oil now trading at $67 up circa 48% from the start of the year.

Environmental themes and climate change had a strong month as President Obama’s administration continues its support for the ‘eco’ themes. The US is now close to launching its own carbon trading system. Also President Obama announced stretching targets for reducing car emissions in the coming years.

Source – KBC Asset Management & Irish Life Investment Managers