KUWAIT: JUNE 9, 2020

Global markets ended the month of May in positive territory after plans to reopen the economies started to materialize and lockdown measures in several countries are eased further


  • Global markets ended the month of May well in positive territory supported by plans to reopen the world’s major economies, lockdown measures and travel restrictions in several countries are gradually eased, in addition to slightly positive economic data.
  • The MSCI AC World Index advanced by 4.15% for the month, mainly propped by the performance of the markets in the US. The S&P 500 and DJI added a further 4.53% and 4.26% during May, bringing their total performance since hitting their lows on the 23rd of March to over 36%.
  • Oil prices have been recovering steadily since the end of April shortly after the historic production cut agreement by OPEC+ members was reached. Brent recovered by 40% in May closing the month at $35.3/bbl. It has been rallying since April 21 when it reached a record low of $9.1/bbl.
  • The performance of the GCC Markets didn’t reflect the optimism in the oil market especially that prices are still low in absolute terms. The S&P GCC Composite advanced by 1.73% for the month supported by the performance of the Saudi market which managed to top the list of gainers with an advance of 1.41% in May despite the generally mixed performance in the Gulf markets. Dubai’s DFM and Abu Dhabi’s ADX retreated by 4.0% and 2.1% on the back of the double digit gains of April, while Bahrain was down 3.1%.


Activity across Europe also shows signs of stirring as lockdowns are eased, with the Eurozone composite PMI rebounding from an astonishing low of 13.6 in April to an improved but still weak 31.9 in May. There has also been good news so far on the unemployment rate, which – despite GDP plunging 3.8% q/q in Q1 and a projected -10% or more in Q2 – ticked up only fractionally in April to 7.3% from a pre-crisis 7.2% in February. In Italy it even fell, though this merely reflected a large number of people leaving the workforce. One explanation for the resilient labor market is the effectiveness of wage-subsidy programs across the region, which have allowed firms to sustain their workforces despite plunging revenues. However the risk is that if demand for the same jobs does not return, the support money will have been misallocated.

There are signs that economic policy is becoming more active. The ECB announced in June that it would expand the size of its €750 billion PEPP QE program to €1.35 trillion and extend its purchases until at least June 2021 (previously end-2020) – a move aimed at reviving growth and keeping borrowing costs especially for vulnerable countries such as Italy and Spain low. The bank justified this by slashing both its growth and inflation projections: regional output is now seen contracting 8.7% this year (+0.8% in March) and not recovering to pre-Covid levels until 2023. Inflation will plunge to just 0.3% this year and 0.8% in 2021, well below the near-2% target. The policy loosening suggests the ECB is undeterred following a ruling by the German constitutional court in May that the bank may have overstepped its mandate with an earlier (but still active) QE program, which if not adequately rebutted could ultimately lead to a fracturing of support for the single currency.