A common theme in each market commentary introduction over the past few months has been ‘continued economic uncertainty’; this month is no exception, nor can we see that there will be any likely change in the months ahead.


The FTSE 100 ended April at 5,989 from a starting point of 6,070. The index remains hovering around the 6,000 mark; no significant gains have been made in 2011 and this period of transience looks set to continue.

Inflationary pressure remains in the UK with current levels of almost twice the Bank of England’s target. This in turn is putting pressure on the Monetary Policy Committee to increase interest rates. Any rise will have the potential to derail economic recovery – it’s not an easy decision by any means.


Sovereign debt remains the biggest concern across the eurozone. The Portuguese bailout has been confirmed and Greece is looking at further measures aimed at shoring up its ailing economy. The pessimists have started talking about Greece defaulting, asking the question; why would new austerity measures work if previous attempts have failed? Greece defaulting would have a significant impact on the wider economy; not an appealing outcome.

Other countries remain in the spotlight with Belgium having been added to the watch list alongside Ireland, Spain and Italy. Germany remains the darling of the eurozone although there have been recent indicators that their growth may be slowing.


Obama’s visit to the UK may have been a brief distraction from his domestic concerns where consumer confidence has fallen to a six month low according to the Conference Board’s confidence index. Rising food and fuel prices have squeezed personal finances and slowed consumer spending.

Manufacturing remains sluggish and as in the UK, property remains in the doldrums with home prices down 4.2% from the previous three months. According to the report from S&P/Case Schiller, this is the biggest quarter drop since the first quarter of 2009.

All this negative news flow has impacted the dollar with the currency falling steadily against the euro over the month.


China once again holds the headlines in Asia with manufacturing further slowing in May. The slowdown was less than predicted and could be a further indication that China’s economy is heading for a soft landing rather than the crash predicted by some at the start of the year.

China’s economy has become increasingly important in light of the financial crisis in western economies as many countries across the globe have shifted economic reliance towards China. Commodity prices are particularly sensitive to the Chinese economy based on the strength of demand from its manufacturing sector. If some sort of economic correction is unavoidable, a soft landing is certainly the most favourable outcome.

Further afield, and with a close interest in commodities, emerging markets are continuing their growth with Brazil, Malaysia, Russia and South Africa all performing well. The risk of these economies continuing to deliver remains high as wider global economic uncertainty remains.

Once again, caution and uncertainty remain the outlook. May brought few surprises but plenty of mixed news flow fuelled the economic debate, in particular around inflation and interest rate rises. So what’s in store for the summer months? Probably more of the same.