Geopolitical tensions increased in May, as did concerns over the strength of global growth. Trade tensions intensified between the US and China, and later in the month between the US and Mexico, as President Trump announced plans to impose a 5% tariff on all Mexican imports from 10 June. The President is threatening a further increase to 25% by October if Mexico fails to reduce the stream of migrants to the US. There are concerns that the unexpected tariffs could send the US into recession, as Mexico is their largest trading partner.

Global markets were largely negative in May and experienced an unsettled end of the month in response to threats from China and the US. As China prepares a sweeping blacklist of foreign firms following the Huawei ban, Chinese economic data was also in focus, as manufacturing activity slipped into contraction in May. Major Asian indices were affected at the end of the month following the weaker than expected data, as trade relations negatively influence China’s economy.

Major indices in the US and EU moved lower at the end of the month after President Trump’s new rounds of tariffs stoked recession fears. On the continent, German data attracted attention as unemployment increased for the first time in five years and manufacturing contracted. US manufacturing data was also close to contraction.

On the foreign exchanges, sterling closed the month at $1.26 against the US dollar. The euro closed at €1.13 against sterling and at $1.11 against the US dollar.

Investors favoured safe haven assets, including gold, which broke through resistance at $1,286 as it headed through $1,300, to close the month up 1.66% on $1,305.24. Brent crude fell in the month amid trade tensions, to close at $61.69 a barrel, down over 15%.

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