City thinking, local knowledge

June Market Commentary

By Questa Chartered


Economic growth remained subdued at best in many major markets throughout May, as high inflation continued to affect households and businesses across the world and hit confidence.

But significantly, some emerging markets such as India have bucked this trend and seen impressive rates of growth.

As always, let’s take a closer look at the details to find out more about what’s been happening over the last month…


The UK saw weak economic growth of just 0.1% in the first quarter of 2023, with output hit by factors including poor weather and industrial action. Although the economy remains smaller than it was pre-pandemic, the Bank of England is confident about its prospects and believes the UK will avoid slipping into recession this year.

The International Monetary Fund also believes the country will not see a recession, and upgraded its growth forecast for 2023 from 0.3% to 0.4% However, it warned that inflation is still “stubbornly high” and that interest rates will need to remain high if it is to come down. According to official figures, the UK inflation rate fell from 10.1% in March to 8.7% in April, which is the first time it has fallen below 10% since last August.

Meanwhile, the number of people on UK employers’ payrolls fell by 136,000 between March and April. This was the first drop since February 2021 – and suggests that the labour market is now feeling the impact of subdued economic growth. By contrast, house prices in the UK rose by 0.5% in April, according to Nationwide, following seven consecutive monthly declines, raising hopes of a slight recovery in the housing market over the coming months.

It was a mixed picture among UK businesses, with bakery chain Greggs reporting a 17% increase in sales year-on-year. By contrast, online fashion retailer Asos saw a 10% drop in sales during the six months to the end of February year-on-year, and posted a loss of more than £87m. BT, meanwhile, announced it was seeking to cut costs by cutting up to 55,000 jobs over the next few years, with many outgoing customer services staff being replaced by artificial intelligence.

Unsurprisingly, oil and gas companies continued to perform strongly, with Shell reporting profits of £7.6bn in the first quarter of 2023, and BP seeing profits of £4bn over the same period. This was despite energy prices coming down slightly in recent months.

The impact of Brexit continued to loom large in the business community, with carmarker Stellantis warning it may have to close factories in the UK if the government doesn’t negotiate a new deal with the EU. The company, which owns Fiat, Citroen, Peugeot and Vauxhall, said that under the current deal, it would face tariffs of 10% on exports to the EU from next year.

Despite ongoing concerns over the effects of Brexit on the economy, there was good news for the UK capital when London came top of Brand Finance’s new City Index, making it the best city brand in the world.

Although London is clearly well regarded around the globe, concerns have been raised about businesses choosing to list in the US rather than the UK. British technology firm Arm, for example, recently filed to list its shares in the US rather than London. In response to these worries, the Financial Conduct Authority (FCA) confirmed plans to revise and simplify listing rules to encourage more companies to list shares on UK stock markets.

The pound ended May down 0.3% against the dollar, and on the financial markets, the FTSE-100 Index ended the month at 7,458 points, down 5.23% on April.


President Volodymyr Zelensky met with leaders in Paris, London, Rome and Berlin in an effort to secure further military support for Ukraine. While they all committed to supplying extra weapons and equipment, they have so far ruled out sending Eurofighter jets to combat Russian forces.

May also saw the UK host the Eurovision Song Contest on Ukraine’s behalf, as the ongoing war meant it was impossible for last year’s winner to stage the competition itself. The event was another significant show of international support for Ukraine, but the hometown of Ukraine’s Eurovision act was struck by Russian missiles shortly before they were due to perform.


The European Commission revised its growth forecasts for EU members upwards, predicting that its 27 nations will see average growth of 1% in 2023 and 1.7% in 2024. Eurozone members, meanwhile, are expected to see growth of 1.1% this year and 1.6% next year.

However, these average figures hide a number of issues in individual member states. For example, the German economy shrank by 0.3% in the first quarter of the year, which sent the country into recession following a 0.5% contraction in the previous three months.

The French government announced a significant new measure to tackle climate change during May, banning domestic short-haul flights if train alternatives that take under two-and-a-half hours are available.

Meanwhile, the European Union has sought to prepare for climate change-related forest fires by doubling its supply of aircraft that can tackle blazes. Janez Lenarčič, the EU’s Commissioner for Crisis Management, said 2023 has already been “much drier than average” in places such as Spain, Portugal and the south of France, and that its 28 aircraft will be ready to act in what is expected to be a “busy, busy summer”.

In the technology sector, the clash between policymakers and artificial intelligence developers took a new turn, when OpenAI boss Sam Altman backed down on a threat to leave the European Union. Mr Altman had said he would leave the trading bloc if it imposed tough regulations on the AI market. According to the European Commission, agreement among member states on laws governing AI is likely to be reached this year, but it could be up to two years until these rules come into effect.

EU Internal Market Commissioner Thierry Breton has announced that social media giant Twitter has pulled out of its voluntary code to tackle disinformation, although the company itself has made no official comment.

On the financial markets, Germany’s DAX index fell by 1.61% in May to end the month at 15,665 points. Meanwhile, the French CAC 40 index fell by 5.24% to end at 7,099 points.


The US government has faced the very real prospect of running out of money and borrowing to keep funding essential operations. As a result, President Joe Biden has been working to reach an agreement on raising the debt ceiling, which has now been approved by the House of Representatives.

This comes amid a period of sluggish economic growth in the US, as GDP grew by just 1.3% between January and March 2023, when compared with the same period of the previous year. Inflation, meanwhile, dropped from 5% in the year to March to 4.9% in the year to April. That means inflation has slowed for ten months in succession.

The US Federal Reserve has been seeking to control inflation by raising interest rates, and at the start of May, its key interest rate was increased by 0.25%, taking the benchmark rate to between 5% and 5.25%. Despite the rising cost of borrowing, employers continued to create new jobs, with 253,000 jobs being added in April. The unemployment rate dropped to 3.4%.

Ongoing woes in the banking sector continued throughout May, with shares in PacWest and Western Alliance falling after recent banking failures led to a loss of confidence in sections of the market. The US Treasury Department has sought to ease concerns by insisting that the banking system has “substantial liquidity” and “deposit flows are stable”.

Elsewhere in the banking industry, First Republic was bought by JP Morgan Chase for $10.6bn after it was closed by the California Department of Financial Protection and Innovation and the Federal Deposit Insurance Corporation was appointed as receiver. It has subsequently been reported that about 1,000 jobs at First Republic will be cut following the takeover. Jobs are also expected to be lost in Silicon Valley Bank’s US Operations following its takeover by First Citizens.

In the technology sector, Apple saw a 3% drop in revenue during the first three months of 2023, when compared with the same quarter of 2022. That means sales at the tech giant have fallen for two consecutive quarters.

There was better news for the travel industry, with the White House confirming that international air travellers no longer have to show proof that they’ve received a Covid-19 vaccination.

On the financial markets, the Dow Jones fell by 3.89% to end the month at 32,771, while the more broadly-based S&P 500 index went up by 0.09% to end at 4,173.

Far East

China’s economic recovery following the end of Covid restrictions took a blow during May when its official manufacturing purchasing managers’ index fell to 48.8 in May, down from 49.2 in April. Any figure below 50 indicates contraction and means factory activity is now at its lowest level in five months.

However, China’s automotive industry was a relative bright spot for the economy, with official figures showing the number of car exports in the first quarter of 2023 was 58% higher than it had been a year earlier. 1.07m vehicles were exported from China between January and March, compared with 954,185 from Japan.

China also saw an upturn in domestic tourism, with people making 274m trips within the country during its five-day May Day holiday period. That’s nearly a fifth up on the number recorded in 2019.

The tourism industry received a further boost in May with the first commercial flight of the C919 plane. The aircraft, China’s first domestically-manufactured large passenger jet, was built by the Commercial Aviation Corporation of China and flew from Shanghai to Beijing on its maiden flight.

It was a different story at Chinese fast fashion brand Shein, as Republican and Democrat lawmakers in the US have called for the company to be investigated over claims that some of its clothes are made by Uyghur forced labour. Shein has insisted it has “zero tolerance” for forced labour, but the US lawmakers insist they have heard “credible allegations” against the firm.

Growing tensions between China and the US were also laid bare when China’s cyberspace regulator said that products made by US memory chip maker Micron Technology pose a serious national security risk. Products made by Micron will now be banned from major infrastructure projects being carried out in China.

Tesla chief executive Elon Musk visited China at the end of May for the first time in more than three years, and met with Foreign Minister Qin Gang and Industry Minister Jin Zhuanglong. China’s Foreign Ministry has confirmed that Mr Musk is seeking to expand Tesla’s presence in the country, which is the company’s biggest market outside the US.

China is not alone in seeing a slump in factory output, as industrial production in Japan fell by 0.4% in April, when compared with the previous month. This was a disappointing figure, as analysts had expected to see a rise in output of about 1.4%.

All eyes were on Japan during May when it hosted the G7 summit, where world leaders met to discuss issues such as further sanctions against Russia. The summit also saw Japan sign a renewed science and technology deal with the UK, which will see it deepen their relationship in this area.

The scale of attacks by North Korean hackers and ransomware users was highlighted in a new report by Elliptic, commissioned by Nikkei, which revealed that Asian nations account for nearly two-thirds of losses in these attacks. Japan alone accounted for 30% of the world total of over $2.3bn in 2022, seeing losses of $721m throughout the year.

In South Korea, President Yoon Suk Yeol had meetings with several international dignitaries in his diary. Canadian Prime Minister Justin Trudeau met with him to discuss boosting security ties and how to manage relations amid growing tensions between the US and China.

The President also met with European Council President Charles Michen and European Commission President Ursula von der Leyen during the 10th EU-Republic of Korea summit in Seoul. This marked the 60th anniversary of EU-South Korea diplomatic relations, where they discussed issues such trade, sustainable development and supporting Ukraine.

On the financial markets, Hong Kong’s Hang Seng index fell by 8.35% to end May at 18,234. Meanwhile, Japan’s Nikkei index rose by 7.04% to 30,887. China’s Shanghai Composite index fell by 3.57% to 3,204 and the Korea Composite Stock Price Index rose 4.66% to 2,357.

Emerging Markets

India’s economy accelerated to 6.1% in the first quarter of 2023, which means the country is now one of the fastest growing economies in the world. This is up from 4.4% in the previous quarter. Nevertheless, the Reserve Bank of India has suggested this impressive rate of growth might be hard to sustain, due to “slowing global growth, protracted geopolitical tensions and a possible upsurge in financial market volatility”.

May also saw Indian budget airline Go First file for bankruptcy. This was despite domestic air traffic in the country hitting a record high in the previous month, with 456,082 passengers flying on April 30th. Writing on Twitter, Aviation Minister Jyotiraditya Scindia said: “The skyrocketing domestic passenger traffic post-Covid is a reflection of India’s high growth.” Domestic airlines carried more than 37.5m passengers in the first quarter of 2023 – up 51.7% on the same period of 2022.

India’s burgeoning status as a technology hotspot hit the brakes slightly, as the International Data Corporation (IDC) reported that although 31m smartphones were shipped in India between January and March this year, this was 16% lower than in the same period of 2022. This was also the lowest first-quarter figure for four years, and was blamed partly on uncertainty over the economic outlook.

In sanction-hit Russia, the economy contracted by almost 2% in the first quarter of 2023 year-on-year. Match Group, owner of dating apps Hinge and Tinder, is the latest company to pull out of Russia in response to its invasion of Ukraine, and is aiming to have completely withdrawn from this market by the end of June.

Meanwhile, concerns about Russia’s revenues from oil and gas have been raised by Finance Minister Anton Siluanov, but this was downplayed by President Vladimir Putin, who attributed lower revenues to “voluntary cuts” in oil production, and said the situation was “absolutely stable”.

In Brazil, President Luiz Inacio Lula da Silva met with his counterparts from Colombia, Bolivia, Argentina and Chile at the South American Summit at Itamaraty Palace in Brasilia. The visit of Venezuelan President Nicolas Maduro was particularly notable, as he had been banned by former Brazilian President Jair Bolsonaro in 2019. “What’s important about Maduro coming here is that it’s the beginning of Maduro’s return,” President Lula said.

Meanwhile, the Brazilian government has declared a six-month animal health emergency following outbreaks of avian flu in Rio de Janeiro and Espírito Santo.

On the financial markets, India’s BSE Sensex index rose by 2.47% to end at 62,622 points. Russia’s MOEX index rose by 3.05% to close at 2,715 points, while Brazil’s Bovespa index ended the month at 108,564 points.

And Finally…

We’re used to seeing leaves and crisp packets flying around during strong winds, but during one particularly bad storm in Turkey, a sofa was blown off the balcony of a block of flats. The furniture was caught on camera flying through the sky for several seconds before crashing to the ground.

Another neighbourhood that saw disruption recently was Framlingham in Suffolk, where locals complained about the noise being made by a cockerel called Rory. Owner Julie Smith, who has been ordered to keep the noise down, is angry that “someone obviously has a problem with him”, as she claims that her neighbours have told her they can’t hear Rory if they shut their windows.

In other animal news, police in Colorado recently pulled over a speeding driver, but rather than accept his punishment, the motorist tried to switch places with…his dog! Needless to say, officers weren’t fooled and he was detained for driving under the influence of alcohol or drugs.

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