May 2024 Global Market Commentary

Published on
June 7, 2024

Global markets saw a positive performance in May after having witnessed some corrections in April. The MSCI World Islamic Index rose by 2.80% for the month and was up 4.26% year to date. Similarly, the Dow Jones Sukuk Index recovered, ending the month up 1.08% month on month and steadying itself at –0.16% year to date as longer-term yields dipped slightly on easing inflationary pressures.

Headline Inflation finally showed some signs of cooling in May, coming in at 3.4% after a few months of consecutive upward readings and beating expectations. While the Fed maintained its benchmark interest rate at 5.25% to 5.5%, investor expectations are currently pricing in at least one rate cut by the end of the year.  In the bond market, yields on ten-year Treasury securities fell to 4.5% after having risen in April.

Other U.S. economic indicators were mixed. The Manufacturing PMI increased slightly to 50.9 from 50.0, indicating a slight expansion in the industrial sector. However, the unemployment rate edged up to 3.9%, signaling a slight slowdown in the labor market. Along with headline inflation, core inflation also eased to 3.6%. This combination of moderate industrial growth, a small uptick in unemployment, and a reduction in inflation levels has helped investor sentiment.

The UK's economic indicators showed conflicting trends. On the one hand, inflation showed a sharp decline to 2.3% from 3.2% the previous month, indicating a cooling economy. On the other hand, the UK's manufacturing sector showed signs of robustness, with the Manufacturing PMI rising to 51.3, the highest since July 2022 and signaling an expansion for the first time in months. Retail sales meanwhile took a hit, dropping significantly to -2.7% year-over-year from a previously positive 0.8%, likely affected by the reduced consumer spending power and lingering economic uncertainties.

In the Eurozone, economic performance was dampened by rising inflation which edged up to 2.6% from 2.4% earlier along with higher core inflation, indicating persistent price pressures. The manufacturing PMI recovered slightly but remained below the 50 level.  Eurozone retail sales finally showed positive trends with a rise of 0.7% after having been in the red for months.  These trends highlight the ongoing challenges faced by Europe in managing inflation and stimulating economic growth amid complex external pressures.

China's economic indicators showed a mix of slight improvements and ongoing challenges. Inflation measured by the annual CPI rose to 0.3%, a positive trend which has been witnessed for a few months. However, retail sales growth slowed along with the Manufacturing PMI slipping below 50 again, signaling a contraction in manufacturing activity. The unemployment rate also saw a slight rise to 5.2%, highlighting persistent labor market challenges.

After hitting close to $90, Brent crude oil prices declined sharply in May, down to $81.6 per barrel as increased inventories and lowered geopolitical stress. Gold held on, rising 1.7% to $2,331 per ounce as investors hedged inflation and uncertainty through precious metals.

Looking ahead, global markets will continue to be influenced by economic data and central bank policy action. Investors should consider prudent investment strategies and diversify their portfolios to effectively manage risks and navigate the uncertainties of the evolving market conditions.

Source: Bloomberg

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As with any investment, a Wahed Invest Ltd investment puts your money at risk, as the value of your investment can go down as well as up. The tax treatment of your investment will depend on your individual circumstances and may change in the future. If you are unsure about whether investing is right for you, please seek expert financial advice.

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