Skip to main content Skip to site footer

You are using an outdated browser. Please upgrade your browser to improve your experience.

Archinomics Monthly - May 2023

one year ago



Global equities were mixed in May. Japanese stocks were among the best performers with the TOPIX Index rising 3.6%, boosted by increasing overseas buying. US indices also moved higher, although returns were driven by a narrow group of ‘new technology’ stocks. The tech-heavy Nasdaq Composite Index rallied 5.8% while the S&P 500 Index rose just 0.2% as all sectors apart from technology, communication services and consumer discretionary declined. In contrast, Chinese shares fell sharply (MSCI China Index -9.0%) amid concerns that China’s economic recovery might run out of steam. European equities also retreated over the month (EuroStoxx 50 Index -3.2%), with UK equities particularly weak (FTSE 100 Index -5.4%).


Bond markets were unnerved by the prospect of a US default as early as 1 June. While US bonds rallied on news of a last minute deal, they still closed the month lower. The 10 year US Treasury bond fell 1.5% over the month. US corporate bonds outperformed Treasuries but returns were still negative. European bonds also staged a late month rally, lifted by news that headline inflation rates for May had fallen more than expected in Germany, France and Spain. The 10 year German Bund returned 0.6% for the month, with European corporate bonds also rising slightly. UK bonds were outliers as stubbornly high UK inflation raised the prospect of further rate hikes from the Bank of England, causing the yield on the 10 year UK Gilt to retest levels last seen during Liz Truss’s short-lived tenure as prime minister.


The US dollar strengthened as ongoing solid data raised the prospect that the Federal Reserve might continue to increase interest rates. The dollar rallied 2.2% against the Japanese yen and 3.1% against the euro.


Energy prices continued to fall. Oil dropped 8.6% to close at $72.70 a barrel (Brent crude) on concerns of slowing demand, both in China and globally. European natural gas prices also moved lower, as did the prices of industrial metals such as copper. Gold prices eased 1.4% to $1,962.70 a troy ounce. 

Market Volatility

Market volatility

Volatility rose modestly, as fears of a US default increased, although the Vix Index remained below the 20 level which is usually viewed to be an indicator of market stability. Overall the Vix Index rose 13.7% over the month to close at 17.9.

Responsible investing

Leading scientists, including those that have been involved in its development, warned of the threat that leaving AI unchecked could pose to mankind. The scientists recommended that mitigating the risk of extinction from AI should be a global priority alongside other risks such as pandemics and nuclear war, and that AI should not be used by the military.


US lawmakers continued to argue over increasing the government debt ceiling. While it had yet to be fully ratified by Congress, President Joe Biden and House of Representative’s Speaker Kevin McCarthy reached a last minute deal, allaying fears that the US would default on its debt in early June.

Semiconductor stocks surged as artificial intelligence (AI) and its applications became the focus of investor interest in May. Shares of NVIDIA surged as it raised its sales guidance significantly. NVIDIA chips are used to power many AI applications including ChatGPT.

Central banks continued to tighten monetary policy, with the US Federal Reserve, European Central Bank and Bank of England all increasing rates by 25 basis points. However, policymakers emphasised that the peak of rates had probably yet to be reached and that further rate hikes should not be ruled out. 


on the

China’s economic bounce back from the relaxation of its zero-Covid policy has shown signs of waning, with the lastest economic data releases missing forecasts. Chinese policymakers are expected to announce measures to stimulate growth.

The inflation outlook in Europe is birfurcating. Eurozone inflation fell to 6.1% in May, but UK inflation remains stubbornly high, buoyed by rampant food prices and high pay awards. While the likelihood of the European Central Bank halting its rate hikes is increasing, the probability of further significant hikes from the Bank of England is growing.

Trade tensions between the US and China remain somewhat elevated, with China banning US chipmaker Micron Technology from its infrastructure, on the grounds of “serious network security risks”. This follows similar moves by the US, as well as Japan’s controls on exports of semiconductors to China. 


We use cookies to give you the best possible experience of our website. If you continue, we'll assume you are happy for your web browser to receive all cookies from our website. See our cookie policy for more information on cookies and how to manage them.