Ireland >>
Market and views
Market Review May 2010
Market attention on Greek debt problems intensified over April. Greek bond yield spreads over German bunds widened to record levels and credit default swaps (CDS) rose. Standard and Poor’s decision to cut Greece’s sovereign rating to junk status heightened concerns. Downgrades to Portugal and Spain reinforced the view that euro-area problems aren’t just confined to Greece; periphery asset prices fell. As market fears of a Greek default escalated, the EU was forced to outline details of its aid plan. Loans of up to €30bn from EMU member states were announced along with an IMF loan of up to €15bn. Greece finally requested funds towards the end of the month as its asset prices plunged further. This provided some market relief, but uncertainty still remained over the approval process for the loans, notably in Germany.
The long risk trade struggled to gain momentum. Equity markets hit fresh 18-month highs, but then fell as Greek debt worries escalated. Data and Q1 earnings, however, were solid overall, particularly from the US. This reinforced the view that the global economic recovery is gaining some momentum. The Fed showed no sign of moving nearer to policy tightening after maintaining its ’extended period’ language. The mix of upbeat data and Greek worries saw a mixed performance from the US dollar. US 10 year Treasury yields ground lower, within a 3.65-4.00% range, suggesting that Greek contagion had failed to spread outside of the euro area over the month.
The election was the main focus for UK asset markets. The televised leaders debates had a significant impact on the polls and risks of a hung parliament increased. Data and monetary policy took more of a back seat, but Q1 GDP did disappoint, showing only a 0.2% quarter-on-quarter pace of growth. Together with higher-than-expected inflation, another large decline in employment and sluggish retail sales, this reinforced the view that the UK is experiencing a distinctly frail emergence from recession. There was slightly better news on public finances, but worries about cutting the large deficit continued.
Source: Fund Manager’s Monthly - RBS 30 April 2010
Indices Performance Review
| Index | 1 Mth | YTD | 1 Yr |
|---|---|---|---|
| Ireland | 6.9% | 14.2% | 29.6% |
| Euroland | -2.8% | -2.0% | 22.3% |
| UK | -2.2% | 2.6% | 30.9% |
| US | 1.5% | 6.4% | 36.0% |
| Japan | 0.8% | 14.9% | 17.8% |
| Pacific Basin | 0.2% | 0.0% | 33.4% |
Performance of Global Indices
1 Year to 30 April 2010:
Irish Market Review - May 2010
The ISEQ index rose 6.9% in April, significantly outperforming its international peers and against a backdrop of a declining European market. Three significant events dominated. Airlines suffered with Ryanair and Aer Lingus giving up ground following the Icelandic ash cloud disruption. Banks benefited from improved sentiment around NAMA transfers and greater certainty on capital raisings following Bank of Ireland’s capital restructuring announcement.
UK Market Review - May 2010
UK equity markets retreated marginally last month as a decision by Standard & Poor’s (S&P) to reduce the credit ratings of Greece, Portugal and Spain led to deepening concern that several indebted European nations were moving closer to default. The FTSE All-Share index, having hit a 20-month high in March, returned -1.4 per cent. Fears that the UK election would deliver no clear winner; thereby making it that much harder for a new government to reduce the country’s huge budget deficit, further weighed on the market.
Eurozone Market Review - May 2010
The Dow Jones Europe Stoxx (-1.4%) had a negative month, underperforming the FT 100 (-2.2%) and S&P 500 (+1.5%) on a constant currency basis (euro). Forestry & paper (+10.5%), Automobiles (+7.4%) and Engineering (+4.2%) were the strongest-performing sectors in Europe. The laggards included Insurance (-8.8%), IT Hardware (-7.7%) and Mining (-6.7%).
Japanese Market Review - May 2010
Japanese stocks fell in line with the majority of other developed markets. A measure of Japanese business confidence rose for an eleventh consecutive month while other economic indicators suggested that Japan’s economy is beginning to recover. Energy stocks were the best performers while utilities lagged as investors switched out of defensively oriented stocks into more economically sensitive areas of the market.
Pacific Basin Equity Market Review - May 2010
Asian stocks advanced, bucking the weaker trend seen elsewhere, as investors shrugged off concern over Europe’s sovereign debt crisis, opting instead to focus on the relatively rosy economic picture in Asia. Indonesia, Korea and Malaysia were among the best performing markets while Chinese stocks sold off. Economically sensitive sectors such as technology, materials and industrials, all rose while financials reacted badly to events in Europe.
US Equity Market Review - May 2010
The US equity market rose for a third successive month as evidence that the world’s largest economy is making the necessary transition from a government-policy-induced recovery to a self-sustained expansion, continued to accumulate. Aside from robust economic data, resurgent merger and acquisition activity and a strong earnings season underpinned the positive tone, although stocks came off the boil towards the end of the month amid mounting concern over Europe’s debt crisis.