For the latest ETF industry news, please refer to our “Asia ETF Roundup (Industry) – May 2022”.
Major Markets Performance
Russia-Ukraine war lingered on and the EU imposed further sanctions on oil imports from Russia. For the month of May, crude oil prices rose 12%. Global equity markets, were little changed in May. The Morningstar Global Markets Index rose 0.1% while the Morningstar US Market Index fell 0.2%. In China, Shanghai ended its two-month lockdown on recent surge in COVID-19 cases. The Morningstar China Index rose 1.3% in May. Elsewhere in the emerging markets, market performance was mixed. South Korean and Taiwanese markets rose 2-3% while stocks in Pakistan and India fell 11.5% and 6.1%, respectively.
After the U.S. dollar strengthened in April, it weakened in May, depreciating by 1.2%, as proxied by the ICE USD Spot rate. The Chinese Yuan continued its weakness, falling another 1.0% against the U.S. dollar, putting its year-to-date depreciation at 4.3%.
Precious metals’ performance was mixed in May. Gold and silver prices fell 3.8% and 7.0%, respectively, while platinum prices rose 3.3%.
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Economic and Market News
U.S. Fed Hikes Rates by 50bps; and It Isn’t Alone in Raising Rates
- U.S. Hikes Rates by 50bps – On 4 May, the U.S. Federal Reserve decided to raise the target range for the federal funds rate by 50bps, putting the target range at 0.75%-1.00%. The Fed also outlined plans to reduce its balance sheet. Beginning 1 June, the reduction cap for Treasury securities will be set at USD 30 billion per month and mortgage-backed securities at USD 17.5 billion. The cap will be increased after three months to USD 60 billion and USD 35 billion, respectively.
- Other Rate Hikes Around the World – In May a number of central banks around the world raised their key interest rates, examples include: Australia (+25bps), Brazil (+100bps), Malaysia (+25bps), New Zealand (+50bps), The Philippines (+25bps), South Korea (+25bps), the UK (+25bps).
China Economic Data: Inflation at 2.1% in April; Caixin/Markit PMI and Official PMI Rose in May But Remain in Contraction Territory
- Inflation registered at 2.1% in April, up from the 1.5% reading in March.
- China’s Caixin/Markit PMI rose to 49.1 in May, from the reading of 46.0 in April. The official PMI also rose in April to 49.6 from 47.4 in April. However, both readings remained below-50, in the contraction territory.
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