More recent data pointed to slowing momentum in the current quarter.
The flash eurozone composite PMI fell to 53.3 in May from 54.1 in April. That represents a fifth consecutive month of growth in business output but the reading was a three-month low amid weakness in the manufacturing sector.
Eurostat data showed euro area annual inflation rate was 7 per cent in April 2023, up from 6.9 per cent in March. The European Central Bank raised all three of its key interest rates by a further 0.25 per cent.
However, there were some encouraging signs of easing price pressures in preliminary data for May.
Germany was among several countries reporting a drop in inflation, with a fall to 6.3 per cent in May from 7.6 per cent in April.
France also reported a slowdown in price growth, boosting hopes that eurozone rate rises may soon end.
UK
UK equities fell in May. The large UK-quoted diversified energy and basic materials groups were among the most significant fallers amid broad-based weakness in commodity prices.
Technology was the only sector to record a positive return, although financials also fared relatively well, helped by the banks sector, which held its value over the month.
The Bank of England announced a twelfth consecutive rise in the base rate, hiking 25 basis points, from 4.25 per cent to 4.5 per cent.
The BoE also upwardly revised its growth and inflation forecasts, shortly after which the Office for National Statistics confirmed that the UK economy grew by 0.1 per cent in Q1 2023.
All of this data further supported the view that the UK economy would avoid a recession this year.
Consumer price inflation slowed less than expected to 8.7 per cent in April, from 10.1 per cent in March, revealed the ONS.
Core inflation – which strips out volatile items including energy and food to give underlying trends – rose versus March, and at 6.8 per cent was the highest since 1992.
There was a further rise in UK interest rate expectations with it generally accepted that the BoE has more work to do to tame underlying inflation.
Japan
The Japanese stock market continued its strong momentum during May and the TOPIX Total Return index rose by 3.6 per cent in local terms. The momentum behind the Japanese yen also continued and it weakened against the US dollar, reaching the 140 yen level.
Foreign investors continued to purchase Japanese stocks and that drove the market trend in favour of large-cap growth.
An improvement in investor sentiment towards the semiconductor industry also supported the market.
As a result, the Nikkei 225, consisting of large-cap stocks, climbed above the 31,000 yen level and it exceeded its post-bubble economy peak for the first time in 33 years.
