Market update - May 2018

The FTSE100 ended May at 7,678.20, which was 2.2% higher than the April closing figure of 7,509.30.  It is now 8.8% higher than the March closing figure of 7,056,61 and more or less back to the 2017 closing figure of 7,687.77. In the US, the Dow Jones Industrial Average rose 1.0% to close May at 24,415.84. In terms of £ Sterling, it ended May at 1.33 US Dollars.  This was 3.4% lower than the closing figure at the end of April of 1.38 US Dollars. Against the Euro, £ Sterling ended April at 1.14 Euros, which was 0.2% lower than the April closing figure. Inflation, as measured by the Consumer Prices Index including owner occupiers’ housing costs (CPIH), was 2.2% in April 2018 (this is April’s data which is reported in May). This was down from 2.3% the previous month.  The 12-month rate for the Consumer Prices Index (CPI) rate which excludes owner occupied housing costs and council tax was 2.4% in April 2018, down from 2.5% in March 2018, 2.7% in February 2018 and 3.0% in January 2018. Despite reports to the contrary earlier in the year, the Bank of England has put back plans for an increase in interest rates after the weaker-than-expected performance of the economy in early 2018. Although the Bank believes the soft patch in growth will prove temporary, seven of the nine members of its monetary policy committee adopted a wait-and-see approach to raising official borrowing costs and voted to keep them at 0.5%. The minutes of the week’s monetary policy committee meeting show that rate rises are still being planned in order to meet the government’s 2% inflation target, but the language was notably softer than in February when the Bank said policy would probably need to be tightened earlier and to a greater extent than the markets were expecting. This will be a disappointment for deposit savers, who last saw an increase in interest rates to 0.5% in November 2017.