Introduction

May 2024 brought a welcome rebound in global markets following April's volatility. Softer inflation data and cautiously dovish central bank commentary helped ease rate hike concerns, allowing equities and bonds to recover some lost ground. While geopolitical risks and policy uncertainty remained, investor sentiment stabilised as markets priced in a more balanced outlook for global growth and monetary easing in the second half of the year.

United States

U.S. equities resumed their rally. The S&P 500 gained 4.3%, while the Nasdaq Composite advanced 5.0%, buoyed by falling Treasury yields and optimism around AI-driven earnings growth. Investor focus shifted toward signs of a mid-year policy pivot from the Federal Reserve, which held rates steady at 5.25%–5.50% during its May meeting.

The April CPI, released mid-May, showed inflation cooling to 3.3% headline and 3.5% core. Markets interpreted the data as supportive of a September rate cut, which was further bolstered by dovish remarks from several Fed governors. The 10-year Treasury yield dropped to 4.41% by month-end, from a high of 4.67% in April.

Europe

European markets advanced modestly. The Euro Stoxx 50 rose 2.7% amid stronger earnings from industrials and a rebound in financials. ECB officials maintained a dovish tone, with the European Central Bank widely expected to begin cutting rates at its June meeting. Eurozone inflation declined to 2.3% headline and 2.8% core, boosting expectations for gradual monetary easing.

Economic data remained weak, particularly in Germany, where manufacturing continued to contract. However, consumer sentiment and services activity improved across Southern Europe. Bond yields in the region tracked U.S. Treasuries lower, helping support risk assets.

Asia-Pacific

Asian equities delivered mixed results. Japan's Nikkei 225 rose 3.1% as the Bank of Japan reiterated its accommodative stance despite rising inflationary pressure. The yen stabilised after a sharp decline in April, following verbal intervention by policymakers. The BoJ signalled it may raise rates later in 2024 but provided no firm timeline.

In China, the Hang Seng Index rallied 7.2%, while the Shanghai Composite gained 3.6%, supported by state-directed equity purchases, easing property restrictions, and improving industrial activity. Markets welcomed Beijing's latest infrastructure stimulus plan and VAT cuts aimed at reviving domestic demand. Australia's ASX 200 edged up 1.5%, supported by mining and stable employment data.

Emerging Markets

Emerging markets rebounded strongly in May. The MSCI Emerging Markets Index rose 4.8% on the back of dollar weakness, falling global yields, and improving risk sentiment. EM equities saw renewed inflows, while EM sovereign bonds outperformed both in hard and local currency terms.

India's Nifty 50 rose 2.9% as its national elections progressed without incident and macro data remained robust. Brazil's central bank paused its easing cycle, citing external volatility, but the Bovespa rallied 3.3% on strong commodity exports. Mexico, Indonesia, and South Africa also delivered positive returns.

Commodities

Oil prices were range-bound in May. Brent crude hovered between USD 81 and USD 84/barrel, as OPEC+ production discipline was balanced by mixed demand forecasts and elevated inventories. Markets awaited clearer signals ahead of the June OPEC+ meeting.

Gold surged to new record highs above USD 2,450/oz mid-month before settling around USD 2,425/oz. Continued central bank buying, falling real yields, and geopolitical hedging supported demand. Copper gained 6.2% in May, driven by tight global supply and strong Chinese factory output data.

Fixed Income & Currencies

Bond markets recovered in May. The U.S. 10-year yield declined by over 25 basis points, and credit spreads tightened slightly across both investment-grade and high-yield sectors. European and UK bond markets followed suit, pricing in lower policy rates ahead.

The U.S. dollar weakened modestly against a basket of currencies. The euro and yen rebounded slightly, while the Singapore dollar remained firm. EM currencies outperformed, with the Brazilian real, Indian rupee, and Mexican peso gaining on improved capital inflows and relative monetary stability.

Outlook

May closed on a cautiously optimistic note as markets balanced improving inflation dynamics with lingering uncertainty around the timing and pace of central bank easing. With rate cuts on the horizon and earnings resilience intact, investors are entering the second half of 2024 focused on growth durability, geopolitical risks, and sectoral rotation opportunities.

Brightness Capital & Asset Advisory remains constructive but selective across risk assets. We continue to favour high-quality equities, short- to intermediate-duration bonds, and structurally supported EM exposures, while actively managing currency risk and macro-driven volatility into the summer.