The S&P 500 struck a new all-time high in the period and ended the month up 1.3% overall. There was a socalled "reluctant rally" as investors continued to view equities as the least bad option with interest rates and bond yields anchored at record-low levels. After scaling new heights in the middle part of the month, US equities then retreated following a slew of poor macroeconomic data, including a disappointing first-quarter GDP print of -0.7%. Forward indicators also disappointed, including a notably lower-than-expected ChicagoPurchasing Managers' Index (PMI).
Meanwhile retail sales were flat in April although, on a more positive note, the Conference Board measure of consumer confidence rose in May, albeit the 95.4 reading was still some way off March's level above 100. Core non-durable goods orders were weak again, further underlining the fragile state of business confidence. However, a rebound in non-farm payrolls in April, after March's disappointing reading, supported the case for a second-quarter recovery in the US economy. The bulls further emphasised that the first-quarter growth disappointment was down to the poor weather and port closures. Despite the raft of poor data, the dollar strengthened and 10-year Treasury bonds continued to sell off as expectations were maintained that US base rates would rise later this year.
US corporate newsflow was also patchy. Retail giant Wal-Mart Stores reported disappointing first-quarter results amid lacklustre sales growth while profits were hit by rising wages and the strong dollar. Merger and acquisition (M&A) activity was a feature in the market as US regulators agreed to the combination of the country's second and third largest tobacco groups Reynolds American and Lorillard. There was also talk cloud computing expert Salesforce.com might attract a bid.
Eurozone
Eurozone equities delivered positive returns in May, supported by improving economic growth. First quarter GDP growth for the single currency region was 0.4%, an acceleration from 0.3% in the final three months of 2014. German growth was perceived as somewhat disappointing at 0.3% but France grew 0.6%, Italy 0.3% and Spain 0.9%. Other economic data painted a mixed picture. The flash composite purchasing managers' index declined for the second successive month in May as the services index fell although manufacturing activity improved. The German Ifo business climate indicator edged lower to 108.5 from 108.6.
European Central Bank board member Benoit Cœuré said the central bank would adjust its asset purchase programme over the spring and summer, increasing purchases in May and June as market liquidity is likely to dry up during July and August. However, the average monthly rate of €60 billion of purchases would not change. Greece's debt crisis continued to make the headlines. Negotiations with international lenders continued but there were mounting concerns that Athens may be unable to make debt repayments due in June.