Equity markets saw material declines and increased volatility in May, with global politics being the main driver as trade tensions between the US and China escalated and the risk of Brexit without a trade deal increased.

The Euro Stoxx 50 index had a poor performance in May, posting a loss of 5.5%. Political uncertainties were also felt around the globe as the US, Japan and the emerging markets all suffered losses in excess of 6%.

While equity markets performed poorly in May, the bond markets saw better returns as investors opted for safer investments. UK government bonds posted a gain of 2.9%.

The Solvency II GBP risk free rates saw material declines in May at all terms. EUR long-term rates are approaching the record low levels seen in 2016.

Volatility increased during May across all developed markets on the back of political uncertainties. The realised volatility went above 10% for UK, European and US equities. Volatility risk premiums for European, UK and US equities increased in May.