The rise in the MSCI Europe ex UK index for the month of May 2021 was the result of a hard-fought battle between hope of renewed economic vigour as economies reopen post Covid-19 lockdowns and the ever-present threat of the impact this may have on prices as companies scramble to restock to meet the renewed demand.
At the same time, fears lingered of a resurgence in the virus particularly in Asia where many nations are nowhere near the levels of progress made in vaccination rollouts as seen in the Northern hemisphere. India in particular was a cause for concern with the variant there potentially considerably more transmissible than those seen before. But optimism prevailed, and with inflation still viewed as transitory in nature rather than a deep-rooted affair, the overall environment for equities remained positive. Europe appeared to be making progress on several fronts.
Despite the vaccine roll out getting off to a shaky start considerable progress was made over the course of the month and there were clear indications of the impact this was having. In Italy, the national curfew began to be phased out while in France outdoor eating for restaurants was once more permitted. The ECB, while noting the “remarkable exuberance” of financial markets, gave little indication that their recent largesse would be reigned in any time soon. Meanwhile, better than expected macro-economic news such as retail sales and employment numbers indicated a recovery firmly on track.