NBK Capital Global Markets Commentary – May 2017

Kuwait: June 6, 2017

The FTSE 100 was the best performing, rallying to 4.4%

May was a green month for most of the World, not including the GCC. Global equities ended the month on a positive note, up 1.9%. The MSCI Emerging Market Index also continued to perform well, up 2.8%. The FTSE 100 was the best performing, rallying to 4.4%. The British market reached an all-time high of 7,547.63 during the month. Other major markets ended the month with gains, whereas the GCC region was down 1.3%. Commodities had a relatively mixed performance for the month, with Gold unchanged at 0% and Brent down 2.8%.

US Manufacturing shrank slightly although remained above 50, with the ISM Manufacturing PMI for May coming in at 54.9, slightly higher than April’s 54.8. The labor market continues to be healthy with Initial Jobless Claims at 248,000, higher than market expectations of 239,000. Durable Goods Orders fell 0.7% in April, its first decline in 2017. Housing Starts along with Building Permits also fell in April, down 2.6% and 2.5%, respectively. Retail Sales gained 0.4% in April, missing market expectations of a 0.6% gain. Existing Home Sales was down in April, coming in at 5.57m compared to March’s 10-year high reading of 5.7m. Consumer Sentiment was at 97.1, slightly higher than April’s 97.

US equities were up, closing the month with a gain of 1.2%, as measured by the S&P 500.

The UK Manufacturing Purchasing Managers Index (PMI) was 56.7 for the month of May. The Consumer Price Index for April, YoY, was 2.7% compared to 2.3% in March. Retail sales increased 2.3% month-over-month in April, its biggest gain since January 2016. Consumer confidence fell to -5 in May from -7 in the previous month.

European equities rose in May by 0.8%, as measured by the Stoxx Europe 600

The Eurozone Markit Manufacturing PMI for the month of May was 57, unchanged from last month. This is the highest reading since April 2011, as exports rose the most in over six years. The Markit Services PMI preliminary reading fell to 56.2 in May from 56.4 in April. Consumer confidence increased to -3.3, its highest level in nearly a decade, after the election victory of pro-European centrist Macron.

European equities rose in May by 0.8%, as measured by the Stoxx Europe 600.

Exports from Japan increased by 7.5% from a year earlier to JPY 6,329.2 billion in April 2017, compared to 12.0% last month. Imports for the same time-period were up 15.1 %. The Nikkei Manufacturing PMI came in at 53.1 in May, slightly above the prior month’s reading of 52.7; indicating manufacturing activity continues to expand. Housing starts were down year on year for the month of April at -1.9% compared to 0.2% for the month of April.

Japanese equities were up in May, as measured by the Nikkei 225, increasing 2.4%.

Exports and Imports from China both rose in May, however not as much as a month earlier. Exports rose 8.0% from a year earlier, slowing from a 16.4% rise in March. Imports increased by 11.9% year-on-year to $141.9 billion in April, after a 20.3% increase in the previous month. Overall, the country recorded a trade surplus in April of RMB 262.3b compared to RMB 164.3b in March. The Caixin Manufacturing PMI for the month of May was 49.6 compared to 50.3 in the previous month while the Non-Manufacturing PMI was slightly higher at 54.5 from 54.0 in April.

Chinese equities, as measured by the Shanghai Stock Exchange Composite Index, reported a loss of -1.2% in May.

The GCC equity markets were all red for the month of May, with MSCI GCC Index posting a loss of -1.3%. Dubai, Abu Dhabi, and Saudi Arabia posted the largest losses, closing at -2.2%, -2.1% and 2.0%, respectively. Oman and Qatar both closed at -1.6%, while Kuwait had the least losses, shedding -0.9%. Within the MENA region, Egypt’s equity market, as measured by the EGX 30 posted a gain of 7.3%.