News & Analysis

May: A Month of Negative News

May 31, 2019

By Deepta Bolaky
 @DeeptaGOMarkets

May: A Month of Negative News

May is the first month in 2019, which caused global stocks to fall in negative territory. As of writing, major equity indices are poised to finish the month in the red.

The movement in the forex markets during the month also shows that investors sought safety with safe-haven currencies like the US dollar and the Japanese Yen. The greenback was firmer against major G10 currencies.

Geopolitical tensions and fundamentals also rattled the oil markets, and oil prices witnessed the most significant day-to-day decline in 2019.

A combination of global headwinds in a deteriorating global environment is exacerbating investors’ fears.

A lengthy US-China Trade War

The US is “not yet ready” to make a deal with China” is the latest comments dominating headlines unless President Trump decides to swing the markets with positive comments to end the month. Throughout the month of May, we saw tensions between the world two major economies rising, and the trade conflict deepening further with passing days:

  • Additional Tariffs: The US hiked tariffs on $200bn of Chinese goods, and China responded by raising tariffs on $60 billion of US goods. 
  • Sale of US Treasuries: A tweet from an editor-in-chief of the Global Times on the possibility of dumping US Treasuries came at a time when China responded to the additional tariffs. 
  • Huawei: Trump administration banned Huawei from importing U.S. technology, but later issued a 90-day license to limit the impacts. Google officially announced its intention to comply with the restrictions set by the U.S. government. 
  • Hikvision and other major Chinese technology companies were also reported to be the next target. 
  • Rare earths: There were rumours that China is planning to retaliate using rare earths. 
  • Limit Intelligence: Financial Times reported that President Trump to threaten curb on intel sharing with the UK over Huawei.

The US and Iran political tensions

The attacks on four oil tankers came amid heightened tensions between Iran and the US. The security adviser John Bolton said, “Iran likely behind tanker attack”. In the past weeks, fears of conflicting erupting in the Gulf region are growing. It was reported that the U.S. has moved reinforcements to the Gulf and is also reducing non-essential diplomatic personnel in Iraq.  

European Parliament Elections and the rise of populism

The 2019 EU Parliament election is one of the most important ones for the bloc amid the rise of nationalism and populist parties. The results confirmed the rising popularity of right-wing parties and populism in Italy, France and the UK.

The pro-European parties still managed to retain the majority, but the “new balance of power” in Parliament will be deeply fragmented as the two main parties – European People Party (EPP) and Social Democrats (S&D) no longer hold a majority together and deciding on the leaders of the bloc’s institutions will be a struggle.

Resignation of Theresa May and Brexit Party

After months of trying to replace the Prime Minister, the UK is facing another hurdle in finding the right candidate to take over. The two main parties- Conservative and the Labor Party suffered a crushing defeat in the EU elections whereas the Brexit Party, which has recently been formed and the Liberals Democrats stood out.

There is pressure on the governing party to find the right candidate to end Brexit chaos. The war of words between the members of the Conservative Party signals more political uncertainties. Boris Johnson, a favourite contender to replace the Prime Minister, is facing court charges over misconduct for having based the 2016 Brexit campaign on the British government paying the EU 350 million pounds every week.

Monday, 03 June 2019
Indicative Index Dividends
Dividends are in Points
ASX200 WS30 US500 US2000 NDX100 CAC40 STOXX50
0.213 0 0.026 0.033 0 1.601 0
ESP35 ITA40 FTSE100 DAX30 HK50 JP225 INDIA50
1.268 0 0 0 2.031 0 12.043

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