![Monthly Commentary May](/globalassets/news/markte/rueckblick-monatsrueckblick.jpg)
Liquidity drives the markets
Despite weak economic data, declining industrial production and a shrinking economy: Hopes for a recovery emerged on the markets, albeit from a low level. Hopes were fueled by extensive support packages in Europe and Asia.
With the exception of the major Asian indices the stock markets continued to recover in May. The German stock index rose 6.68%, significantly outperforming the broad European index Stoxx Europe 600, which gained 3.04%, and the S&P 500, which gained 3.01%. In Asia the Hang-Seng Index (Hong Kong) dropped 8.94%. The global stock index MSCI World increased 3.11% - all index data in euro terms.
The recovery of the markets was partly driven by the declining numbers of new Corona infections in Asia, Europe and the USA, which resulted in faster than expected relaxation of protective measures. On the other hand, the stock markets received support from fiscal policy. In Europe, the EU Commission presented its plan for a 750 billion euro rescue program, for which the Commission intends to place bonds on the capital market for the first time. The Chinese government announced an economic stimulus package in height of USD 840 billion and Japan announced a fiscal package of USD 1,100 billion.
In the course of the easing there was also renewed hope of economic recovery albeit from a very low level in view of leading indicators. The German business climate index of the ifo Institute rose from 74.2 to 79.5 points and the ZEW index for economic expectations published by the Mannheim-based Centre for European Economic Research jumped from 28.2 to 51.0 points.
The purchasing managers' indices for industry rose moderately in Germany (from 34.5 to 36.8) and in the euro zone (from 33.4 to 39.4) while the figures for the service sector made a big leap in Germany (from 16.2 to 28.2) and in the euro zone (from 12.0 to 28.7). In the USA, too, the purchasing managers' indices (Markit) for industry improved slightly to 39.8 and for services more strongly to 36.9. With these values below 50, however, the purchasing managers' indices continue to point to a contracting economy.
Industrial production and new orders fell sharply at double-digit rates in Germany, the euro zone and the USA. As expected, the German economy contracted by 2.2% year-on-year in the first quarter, while the US economy slumped by 5.0%. For the entire year the EU Commission predicted a 7.7% decline in the euro zone economy. The escape to the "safe haven" gold continued accordingly: Gold prices rose from 1,705 to 1,732 US dollars. On the bond markets, the yield on 10-year German government bonds rose slightly to -0.45%, while their US counterparts yielded an unchanged 0.63%.
In China, on the other hand, an initial trend reversal can already be observed in the economic data. There, industrial production rose 3.9% year-on-year. Exports also picked up again with a plus of 3.5%, credit growth was stronger than expected and car sales fell by only around 2% year-on-year in April - in March 48%. However, other indicators such as the import ratio, retail sales and producer prices continued to decline.
There were renewed political tensions between the USA and China. US President Donald Trump blamed China for the outbreak of the Corona virus and threatened to impose new punitive tariffs. In addition, the US announced that it would further restrict the opportunities for global semiconductor companies to supply material to the Chinese communications group Huawei. While China warned of a new cold war, both Chinese and US politicians reaffirmed their intention to stick to the first trade deal.
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