May Market Commentary | HK Wealth

May Market Commentary


April was not a good month for world stock markets. We report on a dozen major markets in the Bulletin: they were all down in the month, with the honourable exception of the UK’s FTSE-100 index, which managed a gain of just 29 points.

Why was it such a poor month? The war in Ukraine is the obvious answer: throw in Covid lockdowns in China which led to ship jams at the world’s biggest port, the inevitable supply chain problems, worries about inflation, Amazon’s first quarterly loss since 2015 and a contraction in the US economy and there are reasons aplenty.May Market Commentary

The month did not get off to a good start, with Russia warning that it would cut off gas supplies to any country that did not pay in roubles – a move that was met with general derision at the time. The World Bank warned that the Ukraine war would more or less cut global growth in half, revising its earlier forecast of 4.7% growth for the year down to 2.5%.

Russian oil continued to flow to India and China but, as we will see below, China had more than its share of problems as lockdowns continued in Shanghai and other major cities. One consequence of the lockdowns was that wait times for semiconductor chips increased, which will have an inevitable impact on the motor industry, among others.

Russia and China committed to ever-deeper strategic ties, with one commentator suggesting Beijing would continue to support Moscow even if it used tactical nuclear weapons.

As always we have looked at all the news in more detail below and – as previously – have included a special section on the Ukraine war. The need to get the Market Commentary to you as quickly as possible meant that the bulk of what follows was written on Sunday 1st and Monday 2nd May. We must issue our now customary caveat that world events may have moved on by the time you read the Market Commentary.


Like all the regions on which we report, good news was hard to find in the UK in April. The month started with the planned National Insurance increases kicking in for millions of people, and with bank rate rises planned in a bid to keep a lid on inflation, the cost of living crisis is not going to end any time soon.

The numbers did not make for good reading, with UK economic growth in February down to 0.1% from the 0.8% recorded in January. Inflation in March was up to 7% – the highest rate for 30 years and up from the 6.2% recorded in February. According to a forecast from bankers J P Morgan, the Bank of England will raise interest rates a further four times this year to try to dampen down inflation. To compound the misery, a forecast from the IMF suggested that the UK will see the slowest growth of the G7 countries in 2023.

Inevitably, all this gloom was reflected on the UK’s high streets as shop sales slowed, with the British Retail Consortium conceding that spending would come under increased pressure from the cost of living crisis. Susan Barratt, CEO of grocery insights firm IGD, said that consumer confidence was now lower than that recorded in December 2013, in the wake of the horsemeat scandal.May Market Commentary

Tesco announced that profits had more than trebled from the previous year – but the analysts’ glass was very much half-empty, as the company’s warning about inflationary pressures saw more than £1bn wiped off the stock market values of the nation’s supermarkets. In the circumstances, we should perhaps raise a glass to Indian billionaire Mukesh Ambani, who is reportedly planning a bid for UK high street chain Boots.

It was a poor start to the year for the UK car manufacturing industry: as companies continued to struggle with global supply chain problems, almost 100,000 fewer cars were built in the first quarter, compared to the same period last year.

There was some good news, though: Government borrowing in the last financial year more than halved compared to the previous year as pandemic schemes – such as furlough – came to an end. Borrowing was £151.8bn, compared to £317.6bn in the previous year.

…And could global supply chain problems eventually turn out to be a good thing? A report from the Office for National Statistics suggested that we might be about to see an upsurge in ‘reshoring’ – that is, bringing manufacturing back to the UK.

The FTSE 100 index of leading shares definitely didn’t ‘surge’ in April but – as we mentioned above – it was the only major stock market that didn’t fall in the month. Having closed March at 7,516, it managed a gain of 29 points, to end April at 7,545. The pound was down by 4% against the dollar, ending the month trading at $1.2573.


Russia invaded Ukraine on February 24th: we are now into the third month of the war and there are plenty of predictions that it will drag on well into next year, with the US pledging to support Ukraine with aid and weapons “until the fight is done”.

The focus of the fighting has shifted to the east, as Russian forces advance – some commentators say ‘slowly,’ others say the advance has ‘stalled’ – in the Donbas region.

There is no good news to report from Ukraine, but there was a glimmer of light on Monday morning with around 100 civilians having apparently been evacuated from the Mariupol steelworks. It is reported that at least two more evacuations will be needed to bring all the civilians out of what are described as ‘dire’ and ‘hellish’ conditions, with one evacuee saying she ‘had not seen sunlight for two months’.  Meanwhile, occupying forces in Kharkiv have now decreed that the rouble has replaced the Ukrainian hryvnia as legal tender.

What is becoming increasingly clear is the impact the war will have on the economy of Ukraine, on wider Western economies and on world food production. We have mentioned economic forecasts from the World Bank and others elsewhere in the Bulletin but, as all readers will know, Ukraine was formerly a major producer of grain and similar products. With Russian forces blockading Ukrainian ports, World Bank President David Malpass has said the world is facing a “human catastrophe”, with the Bank forecasting a 37% jump in food prices, which will hit the poor – and the poorest countries – the hardest. The BBC said that the war will cause ‘the biggest commodity price shock’ since the 1970s.

Let us hope for better news next month. Some pundits are clinging to the hope that Vladimir Putin will announce a ‘victory’ and some sort of ceasefire on May 9th, which is Russia’s Victory Day. Let us hope they’re right, and that next month’s section on Ukraine is the last – but in reality, it is difficult to be that optimistic.


The big news in Europe was, of course, the re-election of Emmanuel Macron as French President. France went to the polls on April 10th and 24thand – as in 2017 – the final round was between Macron and Marine Le Pen. In 2017, Macron won comfortably by 66% to 34%, and while the result was closer this time – Macron won 58.5% of the votes – it was never in serious doubt.

There were plenty of people who didn’t like either candidate – one veteran left-wing politician described it as ‘a choice between Ebola and cholera’ – but turnout was 72%, far from the wholesale rejection of the candidates some had been predicting.

Otherwise, April in Europe was much the same as the rest of the world: supply chain problems forcing up prices and the impact of the war in Ukraine. Eurozone inflation in March was initially expected to be around 7.5%: in the event, it came in at 7.4%, up from the 5.9% recorded in February. City A.M reported that business confidence in the Eurozone had ‘slumped’ in the face of inflationary pressures.

The other continuing worry remains Europe’s dependence on Russia’s oil and gas: the month had started with the CEO of German company BASF, the world’s largest chemical producer, warning of a “total collapse” if supplies of Russian gas were cut. This was followed by Robert Habeck, the German Minister for Economic Affairs, warning that an “immediate embargo on Russian natural gas would threaten social peace in Germany”.

A few days later, Germany ruled out an immediate ban on Russian oil, with Finance Minister Christian Lindner saying the country was moving as fast as possible but, “we have to be patient”. The month ended with Germany risking the wrath of G7 and other European leaders by agreeing to Vladimir Putin’s demands to pay for Russian gas in roubles.

On the stock markets, both the German and French indices were down by 2% in the month. Germany’s DAX index ended April at 14,098. The French market closed the month at 6,534.


The beginning of the month in the US was all about numbers. Figures for March showed that the economy had added 431,000 jobs. That was below estimates of 490,000 and well below the upwardly revised figure of 750,000 for February. In total, 1.7m jobs were added in the first quarter as the unemployment rate decreased to 3.6%.

A week later, the inflation figures were released, showing that US inflation had climbed to 8.5% – the highest rate since March 1981 – as the Ukraine war pushed up energy costs. Further interest rate rises from the Federal Reserve are now all but guaranteed: the expectation is that rates will rise by 0.5% in May.

The month ended with the worrying news that the US economy had shrunk by 1.4% in the first quarter of the year – the first contraction since the pandemic and following the fastest year of growth since 1984. Business and consumer spending both remain strong, but there are obvious worries about a recession in the US.May Market Commentary

There is, though, very clearly no recession at Tesla, where the company delivered a record number of vehicles in the first quarter, despite supply chain problems. The electric carmaker said it delivered 310,000 vehicles in the first three months of the year, 70% higher than the same period last year. Profits for the first quarter were up to $3.3bn (£2.6bn) as customers proved willing to pay more for the cars.

If April brought good news for Tesla, it was exactly the opposite for Netflix, which lost 200,000 subscribers in the first quarter – the first loss for ten years – and duly saw its shares ‘hammered’. According to one report, the company expects to lose 2m subscribers in the second quarter.

The big company news was, of course, Elon Musk’s purchase of Twitter. In the first week of the month, it was reported that the Tesla boss had become the social media platform’s biggest shareholder. By the end of the month, the deal was done, with Musk agreeing to pay $44bn (£35bn) and unlock Twitter’s ‘vast potential’.

But it was back to bad news for the end of the month, as Amazon reported its first quarterly loss since 2015 as the boost to its business from the pandemic started to fade. That signalled a sharp sell-off in tech shares, and completed a miserable month for US stock markets. The Dow Jones index was down 5% at 32,977: the more broadly based S&P500 index fared even worse, falling 9% to close the month at 4,132.

Far East 

As we mentioned in the introduction, April was not a good month for China, with the continuing lockdown in Shanghai impacting not just the national economy but, as we will see below, the global economy as well.

Shanghai is the commercial heart of China, and the month began with the lockdown expanded to cover the whole city as Covid cases continued to climb – and China continued to pursue its ‘zero Covid’ policy.

A week later and figures for March showed that China’s Purchasing Managers’ Index for the services sector had crashed from 50.2 in February to 42.0 in March – the largest decline since February 2020. Tourism spending over the three-day Qingming festival was reported to be 30% lower than in 2021.

There have been suggestions that the lockdown in Shanghai could last until the middle of May, and many clients will have seen internet clips of wire fences being erected and other confinement measures being taken. With other cities also in lockdown and fears about a Covid outbreak in Beijing, it was no surprise to see retail sales down by 3.5% in March, with unemployment rising to 5.8% – the highest level since May 2020.

However, official figures still showed that the Chinese economy grew by 4.8% in the first three months of the year – a faster rate than had been widely expected.

It is, though, economies in the rest of the world that might ultimately pay the price for the lockdown in Shanghai. In terms of container throughput, Shanghai is the biggest port in the world, and it has been forced to operate with significantly reduced numbers of staff, leading to what has been dubbed the ‘Shanghai ship-jam’ – and inevitable supply chain problems around the world. ‘Shanghai is about to wreck your summer’ was how one commentator in the US put it.

In Hong Kong, controversial leader Carrie Lam announced that she would not be seeking a second term as Chief Executive. As yet, there is no successor in sight but we can expect him or her to be equally sympathetic to Beijing.

Over in Japan, Toyota was forced to shut down all 14 of its factories – which account for about one-third of its worldwide production – following a possible cyber-attack. The attack was estimated to cost the world’s biggest carmaker 13,000 vehicles – a small fraction of the 8.5m cars it expects to make this year, but still a worrying sign of what may be to come.

All the major stock market indices in the Far East were, unsurprisingly, down in April. China’s Shanghai Composite fell 6% to 3,047 while the market in Hong Kong dropped 4% to 21,089. Japan’s Nikkei index closed the month down 3% at 26,848 and the South Korean market was down 2% at 2,695.

Emerging Markets 

Inevitably, the Emerging Markets section of the Bulletin is once again dominated by Russian news, with commentators speculating that the country’s financial system was starting to stabilise despite the sanctions imposed. That said, City A.M reported that inflation in Russia was above 16%. Clearly, ordinary Russian citizens will pay a high price for the war.

There has been much discussion about the possibility of a Russian default, but the month ended with the country making $649m (£516m) in interest payments. Having previously said that it would only make interest payments in roubles, Russia ultimately paid the money in US dollars, drawing on its foreign currency reserves.May Market Commentary

One country that does look likely to default is Sri Lanka, with two of the world’s largest credit rating agencies saying that default was now a ‘virtual certainty’ as the country faces its worst economic crisis in more than 70 years.

Away from repayment struggles, the World Bank forecast that the war would cut the Ukrainian economy by half. The Bank said that Russia’s invasion will cause more economic damage in Eastern Europe and parts of Asia than the pandemic.

The BBC reported on new analysis suggesting that 74% of all money made through ransomware attacks in 2021 went to Russian-linked hackers, with researchers claiming $400m (£318m) worth of crypto-currency payments went to groups ‘highly likely to be affiliated to Russia’.

None of it found its way to the Russian stock market in April, which – now open and trading again – closed down 10% at 2,445. The Brazilian market was down by the same amount, ending the month at 107,876, while India’s stock market also fell, albeit by only 3%, ending the month at 57,601.

And finally…

After something of a lull, the ‘And finally…’ section of the Bulletin was back to its best in April.

It has been a while since we were visited by extraterrestrials, but April brought the release of more than 1,500 pages of previously classified information under a US Freedom of Information request from The Sun. Covering the years 2007 to 2012, the documents reveal reports of abduction, radiation burns, telepathy, teleportation, levitation and ‘unwanted pregnancy’ (not all by the same person, we should add…).

Robots have been another long-running theme in this section, and April brought news that Chipotle – an American restaurant chain that has now reached the UK – is using robots to make tortilla chips. CEO Michael Bell claimed that “robots are the future”.

Future generations seem to be at the heart of the Brazilian government’s military priorities, as the country’s Government has faced criticism for buying 35,000 Viagra pills for its armed forces. Apparently, 28,000 were distributed to the navy, 5,000 to the army and a mere 2,000 to the Brazilian air force.

Meanwhile, a Hartlepool United footballer was in the headlines for non-sporting reasons.

Footballers have a long and proud tradition of injuring themselves in unlikely ways. Former Spain international Santiago Canizares famously missed the 2002 World Cup after dropping a bottle of aftershave and slicing his foot and Queen of the South goalie Sam Henderson injured his shoulder by ‘colliding with a cow’. Sadly, both must stand aside for Hartlepool United midfielder Mark Shelton, who missed the game against Scunthorpe (it was a 1-1 draw if you’re interested) after injuring himself with a cotton bud.

Mr Shelton pushed the cotton bud too far into his ear, had to go to hospital and was reported to be ‘dizzy’ and ‘unable to stand up’.


May Market Commentary Sources


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