Monthly Market Review – May 2023


The world economy and financial markets are continuing to see high uncertainties as inflation remains significantly higher than the long-term targets and interest rates continue to rise in most of the major economies to counter high inflation. Moreover, banks are tightening their lending criteria to protect their balance sheets. The eventual trickle-down effect on the economy, consumers, and corporate earnings remains to be seen.

Yet the month of May introduced another factor to the already heightened uncertain economic atmosphere – the debt ceiling. As world financial markets are connected and there is always a risk of contagion, the issue of debt ceiling in the US is significantly important as US markets represent roughly 60% of the world markets. Debt ceiling in the US works like a credit card, we can only spend within the limits set by the credit card provider. Similarly, US government cannot borrow beyond debt ceiling limit, unless it is raised. Apart from the headwinds driven by uncertainty about the economy and fears of a recession resulting from the tough monetary policy and credit tightening, the risk that US could default on its bills to be paid in June mostly dictated the markets in May. The authorities are engaged to raise the debt ceiling (currently $31.381 trillion) at the start of June to avoid the default.

Among equity markets, Japan’ Nikkei 225 has been the best performing equity market index, which surged 6.83% in May and 13.62% on annual basis, particularly after Warren Buffett visited Japan in April and showed his preference for Japanese equities over other developed markets. US broad equity benchmark S&P 500 increased just under 1.72% while DJ Islamic market index returned only 0.88% in May. On the other hand, China’s Shanghai index declined by 4.35%, UK’s FTSE 100 index fell by 3.53%, and Europe’s Stoxx 600 shed 1.28% during the said period. Commodities were the worst performers among major asset classes as oil continued to fall despite OPEC’s surprise decision to cut production at the start of April. Crude oil plunged over 5% while DJ Commodity index dropped almost 6% during May. Despite the heightened worries, gold lost its grip and dropped by 3%.

Market Snapshot

News & Key Events in May


• The Bank of England raised the bank rate by 25bps to 4.5% in May 2023, marking the twelfth consecutive rate increase, in line with market expectations. Borrowing costs are now at fresh highs not seen since 2008, as the central bank continues to battle double-digit inflation.

• The consumer price inflation in the UK fell to 8.7% year-on-year in April 2023, the lowest since March 2022, due to a sharp slowdown in electricity and gas prices. Still, the inflation rate remains well above the Bank of England’s target of 2%.

• The British economy expanded 0.1% on quarter in the first three months of 2023, the same as in Q4 2022, and matching market forecasts.


• The Fed raised the fed funds rate by 25bps to a range of 5%-5.25% during its May meeting, marking the 10th increase and bringing borrowing costs to their highest level since September 2007.

• The annual inflation rate in the US fell to 4.9% in April 2023, the lowest since April 2021, and below market forecasts of 5%.

• The US economy grew by an annualized 1.3% on quarter in Q1 2023, slightly higher than the market forecasts of 1.1%.


• The European Central Bank raised its key interest rates by 25 bps during its May meeting, signalling a slowing pace of policy tightening. Nevertheless, borrowing costs have now reached their highest level since July 2008, following seven consecutive rate increases as the ECB strives to combat high inflation despite ongoing recession risks.

• The consumer price inflation rate in the Euro Area fell to 6.1% in May 2023, down from 7% in the previous month and below market expectations of 6.3%, a preliminary estimate showed.

• The Eurozone’s quarterly economic growth was confirmed at a modest 0.1% during the first quarter of 2023, following a stagnant fourth quarter. The bloc’s economy has been significantly impacted by multiple factors, including a notable increase in consumer prices driven by higher energy and food costs.

• Germany’s consumer price inflation declined to 6.1% year-on-year in May 2023, compared to 7.2% in the previous month and below market expectations of 6.5%, according to a preliminary estimate.


• The People’s Bank of China (PBoC) maintained its key lending rates steady for the ninth straight month at the May fixing, as widely expected. The one-year loan prime rate (LPR), which is the medium-term lending facility used for corporate and household loans, was left unchanged at 3.65%; while the five-year rate, a reference for mortgages, was kept at 4.3%.

• China’s annual inflation rate fell to 0.1% in April 2023 from 0.7% in the previous month, missing market estimates of 0.4%.


• The annual inflation rate in Japan rose to 3.5% in April 2023 from March’s 6-month low of 3.2%, as food prices increased the most since August 1976 (8.4% vs 7.8% in March).

• The Japanese economy grew by 0.4% qoq in Q1 of 2023 after showing no growth in Q4, exceeding market estimates of a 0.1% increase, preliminary data showed.

• The annual inflation rate in Russia fell to 2.3% in April 2023, the lowest since February 2020 and moving further below the central bank’s target of 4% as the base year started to include the initial economic impact of Russia’s invasion of Ukraine.


Data as of 31 May 2023. This article is for information only. Please do not act based on anything you might read in this article. Past performance is not a reliable indicator of current or future returns. This article contains general information only and does not consider individual objectives, taxation position or financial needs. Nor does this constitute a recommendation of the suitability of any investment strategy for a particular investor. It is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any trading strategy to any person in any jurisdiction in which such an offer or solicitation is not authorised or to any person to whom it would be unlawful to market such an offer or solicitation.

When you access a shared link of third-party websites, you are leaving our website and assume total responsibility and risk for your use of the third-party websites. We make no representation as to the completeness or accuracy of information provided at these websites nor do we endorse the content and information contained on those sites.