May Market Commentary


For several months now, we’ve been noting that while growth remains slow across much of the globe, the worst of the inflation crisis seems to have passed.

The International Monetary Fund believes the world economy has been “remarkably resilient” in recent years, noting that despite “many gloomy predictions, the world avoided a recession, the banking system proved largely resilient, and major emerging market economies did not suffer sudden stops”.

But while cautious optimism is growing, the global economy is by no means exactly where investors, businesses, consumers and policymakers want it to be just yet.

As always, let’s take a closer look at key markets around the world and examine the state of play over the last month.


The UK economy saw slight growth of 0.1% in February, following an uptick of 0.3% in January. This has raised hopes that the country is on its way out of recession, after GDP fell for two consecutive quarters in the second half of 2023. Chancellor of the Exchequer Jeremy Hunt hailed the latest figures, describing them as a “welcome sign that the economy is turning a corner”.

There was further good news for the Chancellor last month, as official data also showed that inflation fell to 3.2% in the year to March, taking it to its lowest level in two-and-a-half years.

However, the number of people out of work has gone up in recent months, with the unemployment rate rising to 4.2% between December and February. This is the highest level for six months. The employment rate, meanwhile, fell to 74.5%, and the number of 16 to 64-year-olds defined as economically inactive increased to 22.2% – or 9.4m people.

As the broader economic situation improves, all eyes are on the Bank of England, as its Monetary Policy Committee has opted to keep interest rates on hold at 5.25% in recent months. However, the Bank of England was recently criticised heavily by the former head of the US central bank Ben Bernanke, who was commissioned to lead a review into how it creates its economic forecasts.

In his report, Mr Bernanke acknowledged that while many other central banks have also made incorrect predictions in recent years, the accuracy of the Bank of England’s forecasts have “deteriorated significantly”, partly because it uses outdated tools that are not fit for purpose in the modern world. Mr Bernanke has put forward a series of recommendations and Governor Andrew Bailey has said he will make sure they are implemented.

Slight improvements in key economic indicators are also failing to have a notable impact on the trading environment for many UK businesses. According to the British Chambers of Commerce’s latest quarterly outlook, 56% of firms expect turnover to increase over the next year, which is unchanged from its previous report. Similarly, the proportion of firms expecting an increase in profits barely changed, rising from 47% at the end of 2023 to 48% in the first quarter of 2024.

And worryingly, 46% of businesses polled said they expect to raise prices over the coming year. This could be partly linked to the introduction of new post-Brexit UK border controls which came into force at the end of April. According to estimates from insurance firm Allianz Trade, the new checks could add 10% to import costs over the first year and cost British businesses £2bn.

It was a mixed picture in the retail sector in particular. According to the British Retail Consortium and KPMG, the value of sales rose by 3.5% in March year-on-year, with sales figures for the month being boosted partly by an early Easter.

Supermarket giant Sainsbury’s has performed especially well in recent months, reporting that underlying pre-tax profits have risen by 1.6% in the last year to £701m. This was higher than the amount the company had been forecasting.

By contrast, the Office for National Statistics has reported that rising prices have led to shoppers spending less at department stores, as they saw a 3.7% fall in sales volumes during March. In addition, high street fashion retailer Ted Baker has closed 11 stores and is to close four more in the coming weeks after falling into administration.

April also saw Premier Inn owner Whitbread announce that it is to cut 1,500 jobs. The company is planning to reduce its number of branded restaurants, which include Beefeater and Brewers Fayre, and expand its hotel operations.

In the banking sector, the Coventry Building Society has agreed a potential £780m takeover of The Co-operative Bank, in a deal that would see it become the country’s seventh largest lender. Meanwhile, Lloyds Banking Group reported that pre-tax profits fell to £1.6bn in the first quarter of 2024, down from £2.3bn a year earlier, partly due to growing competition among mortgage lenders.

Furthermore, HSBC’s Group Chief Executive Noel Quinn announced that he is retiring after almost five years in the role. His announcement coincided with confirmation that HSBC experienced a 1.8% drop in profit for the first three months of 2024 year-on-year. Mr Quinn will remain in the role until a replacement has been named.

Elsewhere, energy giant Shell is reportedly leaving London and instead listing in New York, as it believes US investors feel “more positive” about fossil fuels than those in the UK. This would represent a major blow to London’s stock market, as Shell is currently the biggest listed company in Britain, in terms of its market value.

In the tech sector, the march of artificial intelligence (AI) continues at pace, with Microsoft opening a new London office focused on research and development in the AI space. Mustafa Suleyman, Chief Executive of Microsoft AI, said the company plans to “make a significant, long-term investment in the region as we begin hiring the best AI scientists and engineers into this new AI hub”.

However, the UK’s Competition and Markets Authority has warned that big tech’s dominance of the AI market is a “real concern”. Sarah Cardell, Chief Executive of the watchdog, said: “The essential challenge we face is how to harness this immensely exciting technology for the benefit of all, while safeguarding against potential exploitation of market power and unintended consequences.”

The pound ended April down 0.29% against the dollar, and on the financial markets, the FTSE-100 Index ended the month at 8,159 points, up 2.60% on March.


Following a period of stagnation for the eurozone economy, there is growing optimism that the situation is starting to improve. A survey of professional forecasters by the European Central Bank (ECB) found that respondents expect the eurozone to see growth of 0.5% in 2024. This will be followed by an uptick of 1.4% in 2025 and 1.4% in 2026. The specialists polled are also confident that inflation will continue to decline, estimating a rate of 2.4% in 2024 before it falls to 2% in 2025 and 2026 – in line with the ECB’s target.

Meanwhile, the ECB opted to keep interest rates on hold at a record high of 4.5%, a move which had been widely expected by analysts. “Inflation has continued to fall, led by lower food and goods price inflation,” the ECB said. “Most measures of underlying inflation are easing, wage growth is gradually moderating, and firms are absorbing part of the rise in labour costs in their profits.”

However, the organisation said domestic price pressures are “strong” and are “keeping services price inflation high”. The Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner,” the ECB added.

Germany has been one notable cause for concern in Europe over the last few months, but it seems that the situation there is finally starting to get better. The German government has revised its economic growth forecast for 2024 slightly from 0.2% to 0.3%, which Economy Minister Robert Habeck said is a response to “”signs of slight cyclical improvement”.

Germany’s return to growth has also helped private sector activity in the euro area soar to its highest level in nearly a year. The latest S&P Global Purchasing Managers’ Index rated activity at 51.4 in April. Any figure above 50 indicates growth and Germany exceeded this number for the first time since June last year. This was a better figure than analysts had been expecting.

Germany was also rated as one of the most attractive places in the world to do business in PwC’s latest Private Business Attractiveness Index. Despite sluggish growth and high inflation over the last year, the country rose from fourth place to third in the rankings, thanks to factors including its good technology and infrastructure, and a favourable ecosystem for start-ups.

France is another key market where businesses are becoming more confident about its economic prospects. In a poll of 8,500 businesses by the Bank of France, respondents anticipated growth of about 0.2% in the first quarter of the year. However, the level of France’s public debt remains an issue, despite credit rating agencies Moody’s and Fitch both deciding to leave France’s ratings unchanged last month.

French President Emmanuel Macron has sought to drive growth by simplifying and cutting red tape that affects businesses. A bill designed to ease bureaucratic burdens on French companies was unveiled in April by Finance Minister Bruno Le Maire. According to government research, nearly one in three small business owners spend more than eight hours a week on administrative tasks, while four in ten spend more than four hours a week managing admin.

In a statement, the government said: “We need to simplify our economy to win the confidence of entrepreneurs and encourage them to create wealth on our soil.”

One sector that has seen a mixed performance in recent months has been the automotive sector. Volvo saw a record number of vehicle sales in March, with the number going up by a quarter year-on-year to 78,970. This was fuelled partly by the growing popularity of its plug-in hybrid and electric models.

By contrast, Volkswagen saw a 24% slump in sales of its all-electric vehicles in Europe during the first three months of 2024 year-on-year. At the same time, it recorded a 91% increase in sales in China.

April was a big political month for Europe, with Simon Harris being elected as Taoiseach by members of the Dáil in Ireland. The 37-year-old is the youngest person to lead the Republic of Ireland, following the resignation of Leo Varadkar in March.

In Spain, meanwhile, embattled Prime Minister Pedro Sánchez has vowed to stay on, amid corruption claims relating to his wife. A court has opened an initial inquiry into his wife’s affairs, but Mr Sánchez has said he is going to stay on following “expressions of solidarity from all sections of society”.

On the financial markets, Germany’s DAX index fell by 2.78% in April to end the month at 17,977 points. Meanwhile, the French CAC 40 index fell by 2.55% to end at 7,996 points.


The first quarter of the year saw a slowdown in economic growth in the US. According to the latest official data, GDP growth slowed from 3.4% between October and December 2023 to 1.6% between January and March 2024.

While many analysts had expected to see growth decelerate in the first quarter, this was a bigger slump than had been anticipated. At the same time, the rate of inflation rose from 1.8% in Q4 2023 to 3.4% in Q1 2024.

This has led to intense speculation over what decisions the US Federal Reserve will take on interest rates in the coming months.

Olu Sonola, Head of US Economic Research at credit rating agency Fitch, said: “If growth continues to slowly decelerate, but inflation strongly takes off again in the wrong direction, the expectation of a Fed interest rate cut in 2024 is starting to look increasingly more out of reach.” The key US interest rate is currently between 5.25% to 5.5% – the highest level in more than two decades.

Investment bank JPMorgan is already bracing itself for US interest rates going up, with head of the institution Jamie Dimon suggesting they could go as high as 8%. Raphael Bostic, the President of the Atlanta Federal Reserve and a member of the US Fed, has meanwhile insisted that interest rates must be kept at a “restrictive level”. Speaking to BBC News, he suggested that the Fed should “not be in a hurry” on interest rate cuts and said they might only ease “at the end of 2024”, as inflation is only falling “very, very slowly”.

Despite these less than ideal economic conditions, the jobs boom in the US continued, with employers adding more than 300,000 jobs in March. This was the biggest monthly gain in almost a year and was higher than many analysts had predicted.

Against this mixed backdrop, confidence among owners of smaller companies is waning, as the latest National Federation of Independent Business (NFIB) small business optimism index saw a third consecutive monthly decline. Many business owners cited inflation as the biggest problem right now, along with higher input and labour costs.

Bill Dunkelberg, Chief Economist at NFIB, said: “Business owners continue to manage numerous economic headwinds. Inflation has once again been reported as the top business problem on Main Street and the labour market has only eased slightly.”

In the fashion sector, sportswear giant Adidas has confirmed it expects to make profits of £598m this year, after exiting its deal with Kanye West. The company chose to end the collaboration with the rapper and fashion designer after he made several antisemitic comments on social media. Adidas, which makes popular items including Gazelle and Samba shoes, said it had a better than expected first quarter of 2024, and has therefore revised its profit estimates upwards.

Meanwhile, the US Federal Trade Commission (FTC) is seeking to block fashion accessory giant Tapestry’s takeover of Capri. The competition watchdog believes the proposed £6.9bn deal will “eliminate direct head-to-head competition between Tapestry’s and Capri’s brands”. However, Tapestry has argued that the FTC “fundamentally misunderstands both the marketplace and the way in which consumers shop”.

Many will remember the incident earlier this year when a section of fuselage fell from an Alaska Airlines 737 Max 9 plane. United Airlines subsequently carried out inspections of all its Boeing 737 Max 9s and identified bolts in need of “additional tightening” across this aircraft type.

United Airlines has since reported a £161m hit to its earnings in the first quarter of the year, which it says is down to being forced to ground its Boeing 737 Max 9 fleet for three weeks after the incident. The airline believes that had this not occurred, it would have reported a profit between January and March.

Elsewhere in the aviation sector, sustainable fuel producer LanzaJet has confirmed that it plans to build a second plant in the US. The company already operates the world’s first commercial scale ethanol to sustainable aviation fuel plant in Soperton, Georgia. Chief Executive Jimmy Samartzis said it has “doubled down” on building in the US because of the tax credits in the Inflation Reduction Act and the “overall support system that the US government has put in place”.

April was a big month in the tech industry, with Taiwan Semiconductor Manufacturing Company (TSMC) agreeing to build a third factory in Arizona. The US government has committed $6.6bn in subsidies and $5bn in possible loans to support the expansion in an effort to drive domestic semiconductor production.

Meanwhile, Apple’s decision to abandon plans to create a self-driving car have led to the tech giant cutting 614 jobs. Paolo Pescatore, an industry analyst from PP Foresight, said this is notable as Apple is “the last of the big tech giants to make job cuts”. However, he said it has not been driven by the need to make efficiencies. “It feels more like a shift of strategic focus into other new emerging areas like AI,” he said.

Last month also saw President Joe Biden sign into law a bill that requires ByteDance, the parent company of TikTok, to sell the app in less than a year or be banned in the US. ByteDance has insisted it has no intention of selling the business, amid concerns that TikTok could share user data with the Chinese government, and plans to challenge the law, which it believes is “unconstitutional”.

2024 has so far been a good year for streaming service Netflix, which added 9.3m customers in the first quarter of the year. This took its overall number of subscribers to nearly 270m and helped quarterly profits hit £1.85bn. The uptick comes after Netflix began a crackdown on password sharing.

April also saw the 75th anniversary of Nato, which was marked with a special ceremony. Speaking at the event, Secretary-General Jens Stoltenberg hailed the collaboration between Europe and the US, saying “we are stronger and safer together”.

On the financial markets, the Dow Jones fell by 4.35% to end the month at 38,075, while the more broadly-based S&P 500 index fell by 3.00% to end at 5,096.

Far East

Despite the ongoing crisis in China’s property sector, the economy continued to perform strongly, seeing growth of 5.3% in the first quarter of 2024. This was well ahead of many analysts’ predictions. However, there were signs that consumer confidence is waning, as official figures showed first quarter retail sales growth fell to 3.1%.

Meanwhile, real estate developer Shimao Group, which defaulted on offshore bonds two years ago, has now been hit with a winding up petition, after failing to repay loans worth £159.7m. Elsewhere, beleaguered property developer Country Garden delayed the publication of its annual financial results, arguing that it needed more time to gather information as it restructured its debts. This led to the business suspending trade in its shares on the Hong Kong Stock Exchange.

In the tech sector, Chinese car giant BYD has reported a 47% fall in profits in the first three months of the year, partly as a result of slowing demand for electric vehicles. The company sold a little over 300,000 battery-only cars in the first quarter of 2024, down from 526,000 in the final quarter of 2023.

At Xiaomi, buyers of its new electric vehicle – the SU7 Max – have been told they may have to wait 27 weeks for their model to be delivered. The company received nearly 89,000 pre-orders within the first 24 hours of the car being on sale.

The company could face an uphill struggle selling its new vehicle in the US, as President Biden is under pressure to ban imports of electric cars made in China. Senator Sherrod Brown, the Chair of the Senate Banking Committee, said: “Chinese electric vehicles are an existential threat to the American auto industry. We cannot allow China to bring its government-backed cheating to the American auto industry.”

Despite frosty diplomatic relations between the US and China in recent months, their respective governments are still seeking areas of cooperation. President Biden spoke with his Chinese counterpart Xi Jinping on the phone and discussed issues such as climate change and drugs, although they disagreed on the issue of Taiwan, and sanctions imposed by the US on Chinese-owned companies.

“If the United States insists on suppressing China’s high-tech development and depriving China of its legitimate right to development, we will not sit idly by,” Mr Xi said. President Biden added: “I look forward to responsibly managing our relationship in the weeks and months ahead.”

Europe is another market that has experienced difficulties dealing with China. The European Union Chamber of Commerce in China has warned that “draconian regulations” have made it risky for foreign businesses to invest in China in recent years and called for the country to do more to address growing concerns.

“The number and severity of risks companies find themselves having to navigate has grown exponentially in recent years,” said Jens Eskelund, President of the European Chamber in China. The report added that “at a time when the global business environment is becoming increasingly politicised, companies are having to make some very tough decisions about how, or in some cases if, they can continue to engage with the Chinese market”.

In Japan, the yen sunk to a 34-year low against the US dollar last month, before rebounding to healthier levels. After the yen fell to 160.17 per dollar, rumours started swirling that authorities in Japan may need to step in to prop up the currency.

This is yet another red light on Japan’s economic dashboard, as new data has revealed real wages in Japan fell for the 23rd consecutive month in February.

Meanwhile, the number of corporate bankruptcies with liabilities of 10m yen or more in fiscal 2023 rose by almost a third year-on-year to 9,053.. According to the Tokyo Shoko Research, this is the first time it has exceeded the 9,000 mark in nine years.

The majority of bankruptcies were seen among small and medium-sized businesses, as they had to raise prices in order to keep up with rising costs across the board, while many firms also struggled as a result of labour shortages. The construction sector in particular had a difficult period, as bankruptcies in this industry rose by almost 40%, while the number of bankruptcies in the service sector went up by more than a third.

Against this backdrop, Nippon Telegraph and Telephone (NTT) and Yomiuri Shimbun Group Holdings have warned about the impact of artificial intelligence and called for tougher rules surrounding the use of the technology. In a joint statement, they warned that while AI could improve labour productivity “to a certain degree”, it could also lead to the collapse of society if left unchecked.

In the retail sector, Japanese retailer Seven & i Holdings confirmed it is considering listing its superstore business “as soon as reasonably practical”. The business is focusing on its flagship 7-Eleven brand after announcing the closure of several of its Ito-Yokado stores, selling off its Sogo & Seibu department store unit and exiting its apparel business.

As the US and China experience difficult relations, the role of Japan on the global stage becomes especially crucial. As a result, Japanese Prime Minister Fumio Kishida met with President Biden during a visit to Washington, where they agreed to strengthen defence cooperation. Mr Biden described the deals agreed during the meeting as “the most significant upgrade of our alliance since it was first established”.

In South Korea, the Democratic Party has won a landslide majority in the general election, winning 192 of 300 seats in the National Assembly along with smaller opposition parties.

One of the country’s biggest global brands – Samsung Electronics – has meanwhile reported a significant increase in profits in the first quarter of 2024. Operating profit rose to $4.8bn between January and March year-on-year, a nearly tenfold increase driven partly by growing demand for AI-based technology.

On the financial markets, Hong Kong’s Hang Seng index rose by 7.39% to end April at 17,763, while Japan’s Nikkei index fell by 4.86% to 38,405.

Emerging markets

India’s impressive economic growth looks set to continue, according to Moody’s Analytics. Forecasts from the organisation suggest that the country’s GDP will go up by 6.1% in 2024, down from 7.7% in 2023.

“Economies in south and south-east Asia will see some of the strongest output gains this year, but their performance is flattered by a delayed post-pandemic rebound. ” Moody’s Analytics said.

One area that is booming is the M&A market, as there were 427 mergers and acquisitions and private equity deals in India during the first quarter of the year. These were collectively worth more than £20bn, according to Grant Thornton, and include the $8.5bn Reliance-Disney merger.

India’s strong economic performance is good news for the government as the country’s general election continues. Votes are taking place in different parts of the country on seven days, and the results will be announced on June 4th.

Prime Minister Narendra Modi is expecting a high-profile visitor after Tesla and X boss Elon Musk announced that he plans to head to the country soon. Although no date for a meeting has yet been confirmed, it is understood that Musk is planning to announce major investment plans in India.

The move comes shortly after import taxes on electric vehicles for global carmakers were cut and the government said it wants to step up domestic production in the next three years.

By contrast, the situation was less than ideal at airline Vistara, which has been forced to scale back its service after widespread staff unavailability led to many flight cancellations and delays. Local media outlets believe the disruption has been caused by pilots walking out in protest against Vistara’s merger with Air India.

In Russia, western nations had sought to stifle its economic growth following its invasion of Ukraine by imposing sanctions. However, the IMF is predicting that Russia’s growth will outpace the likes of the UK, France and Germany this year, with GDP going up by 3.2%. According to the IMF, this is because government spending has remained high and oil exports have held steady over the last two years. However, that is not to say that sanctions are not still having an effect.

Petya Koeva Brooks, Deputy Director at the IMF, said: “To put this in context, if we look into the medium term, we still have growth rates that are significantly below what they were prior to the war. Now we have growth rates in the order of one and a quarter, as opposed to 1.7, which we had previously, which is another way of saying that the Russian economy is still expected to face these headwinds as a result of the war and the associated sanctions.”

Meanwhile, the Center for European Policy Analysis has noted that sanctions are making Russia more dependent on China and leading it to deal more heavily with rogue states. Stephen Blank, Senior Fellow at the Foreign Policy Research Institute, told the think tank that Russia’s defence output is “clearly facing problems given the Kremlin is constantly running to North Korea and Iran for missiles, drones, and even artillery shells, thereby incurring serious IOUs that must be paid to these rogue states in the future.”

Russian media, meanwhile, has reported that its largest winemaker, Kuban Vino, has been nationalised, as one of its founders was recently arrested and had his assets seized. Yury Antipov has been perceived by the Russian government as a security threat and understood to be transferring assets to countries that have opposed its invasion of Ukraine.

Russia’s status as a global pariah was reinforced last month when French President Emmanuel Macron accused Russia of running a disinformation campaign to undermine this summer’s Paris Olympics. He said there was no doubt that Russia was “putting out stories saying that we are unable to do this or that, so (the Games) would be at risk”.

On the financial markets, India’s BSE Sensex index rose by 0.63% to end at 74,482 points. Russia’s MOEX index went up by 4.04% to close at 3,467 points, while Brazil’s Bovespa index fell by 0.89% points to end the month at 126,970 points.

And finally…

The headlines wrote themselves for the residents of the Berkshire village of Midgham, which recently suffered swarms of – you guessed it – midges.

But while observers might find it delightfully ironic and keen to share their Alanis Morisette memes, it’s been no laughing matter for the 350 people who live there, who say they’ve never seen the situation get so bad.

One resident believes the problem has arisen because the weather was relatively mild during winter, so midge hatches are starting earlier than normal.

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