Market Key Points
- Global share markets continued to advance in May, supported by resilient earnings, improving confidence in the global growth outlook and renewed enthusiasm for AI-related investment themes.
- While geopolitical risks and inflation concerns remained in focus, sentiment was helped by easing energy prices and stronger risk appetite across share markets.
- Bond markets also steadied later in the month as yields eased from their highs, supporting fixed interest returns.
Australian equities
Australian shares delivered positive returns but lagged major offshore markets, with the S&P/ASX 200 Index rising +1.1%. Materials led gains as copper prices surged on expectations of stronger demand from AI infrastructure and electrification trends, while consumer discretionary and real estate also benefited from improving investor sentiment. Healthcare and energy were among the weaker sectors, with healthcare pressured by sector-specific earnings concerns and energy giving back some of its earlier strength as oil prices eased. Smaller companies outperformed larger peers, with the S&P/ASX Small Ordinaries Index gaining +2.0%, supported by broader participation across the market.
Global Equities
International shares produced another strong month of returns, with the MSCI All Country World Index rising +5.4% on a hedged basis and +5.1% unhedged, reflecting only modest currency effects for Australian investors. The US advanced on renewed strength in technology and growth sectors, while Europe and Japan also posted strong gains as investors continued to favour markets outside the US. Emerging markets were the standout, with the MSCI Emerging Markets Index rising +9.6%, driven by strength across Asia ex-Japan, particularly Korea and Taiwan, where semiconductor and AI supply-chain exposure remained supportive. China declined, highlighting the uneven nature of the rally. Global small companies also advanced, with the MSCI World ex Australia Small Cap Index gaining +3.8%.
Property & Infrastructure
Real assets declined slightly in May. Global listed property recorded a modest gain, with the FTSE EPRA NAREIT Developed Index (hedged) fell slightly by -0.6% after gains in April, despite steadier bond yields late in the month and resilient demand for income-oriented assets.
Infrastructure weakened, with the FTSE Global Core Infrastructure 50/50 Index (hedged) declining −2.0%, as investors favoured higher-growth sectors and reduced exposure to more defensive assets following the strong recovery seen in previous months.
Fixed Income
Fixed interest markets delivered positive returns in May as bond yields eased from their intra-month highs.
Australian fixed interest performed particularly well, with the Bloomberg AusBond Composite 0+ Yr Index rising +1.6%, as softer inflation data and weaker labour market conditions led investors to scale back expectations for further interest rate increases. Global fixed interest also advanced, with the Bloomberg Global Aggregate Bond Index (hedged) returning +0.7%, despite only a modest fall in US Treasury yields.
Credit markets also edged higher, supported by tighter global credit spreads and stable conditions in Australia, with both investment-grade and high yield segments delivering positive returns.
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