Monthly review of May 2020

  • 10 June 2020
  • 5 mins reading time

Global stocks rose in May as lockdown restrictions began to be lifted and investors focused on positive factors, setting aside the negatives of economic data, potential secondary surges in contagion and heightened friction between the US and China.

Hopes were raised that there could be an agreement between Saudi Arabia and Russia to reduce the output of oil. That lifted the price of a barrel of oil from around $25 to around $35. This, in turn, supported the share prices of companies across the oil and gas sector.


Before the pandemic, the FTSE All Share Index was trading at around 4,100. It slumped to 2,727 in March, but spent most of April and May recovering. By the end of May its price was 3,363 with the upward momentum continuing into early June.

Meanwhile, the Office for National Statistics noted that the UK economy had shrunk by 2% in the first three months of 2020. This was not as bad as had been feared, though worse numbers are expected for the three months to the end of June.

Despite this, investor focus was on the lifting of lockdown restrictions and hopes of a relatively swift recovery.


In the US, economic contraction in the first quarter of 2020 was more substantial than had been expected, largely due to a sharp drop in consumer spending which accounts for around two-thirds of the US economy. As was the case in the UK though, investors were focusing on the easing of lockdown restrictions. That lifted optimism and stock prices across all industrial sectors with technology, industrials and communication services leading gains.


It was a similar story across the eurozone where stock rises were supported by the announcement of a €750 billion support package from the European Union.

However, the effectiveness of such a small sum when broken down across the 27 member states was called into question. At the same time though, the European Central Bank announced that it would provide additional financial stimulus in June, so investor sentiment became more positive.

The most notable exception to the general rise in global optimism was Hong Kong. The Special Administrative Region of China will be subject to a national security law written in Beijing. The US was not alone in condemning what it considered to be a curtailment of democracy and the rule of law. This led to threats of sanctions against Chinese officials or trade agreements by the US, as well as calls in the UK to extend citizenship rights to Hong Kong holders of “British Passport Overseas” status. The heightening of geopolitical tensions impeded stock price rises in the region, with Hong Kong suffering the most.


Bond investors appeared to be more sensitive than stock investors to such geopolitical and other tensions. The demand for and prices of benchmark government bonds in the US, the UK and Germany stayed fairly steady, even as stock investors appeared to become increasingly ebullient.

By contrast, the outlook for bonds issued by companies (i.e. corporate bonds) improved. Investors were calculating that the sustained substantial support from governments and central banks increased the ability of companies to meet their debt obligations. So the demand for and prices of corporate bonds generally increased.

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