A calmer inflation backdrop and lower bond yields provided support in June, though markets remained alert to shifting central bank policy and global developments.
UK
- UK inflation stabilised at 2.8% for the year to May (April 2.8%), which came in lower than consensus estimate of 3%.
- The UK Composite PMI (indicator of business activity, >50 is expansionary and <50 is contraction) remained below 50 at 49.7, increasing slightly from 48 in the previous month.
- UK equities posted modest gains over June, gaining +1%.Despite strong returns relative to global peers, energy dragged the index due to falling oil price.
- UK unemployment decreased to 4.8%, down from 5%.This was a result of higher economic inactivity (unemployed not looking for work); employment rate was static.
- The Bank of England maintained interest rates at 3.75% (7 hold votes, 2 hike). Next meeting is set for the 30 July.
Global
- Global equities rose +0.7% in a volatile June. The semi-conductor index had daily moves of 5% more than 9 times as news flow dictates sentiment.
- US equities continued advancing, adding a more modest +0.6% in June, following +5.9% in May. ‘Hyperscalers’ sold off whilst value and small caps performed strongly.
- Kevin Warsh’s first meeting as Fed Chair led to rates being held (consensus). His commentary was hawkish, which is a switch from his usual positive tone.
- Japanese equities gained +0.7% in June, with the BoJ raising rates 25bps to 1%. A weaker Yen also supported export sectors such as autos and industrials.
- EM equities retreated -0.3% in June, following two months of double-digit gains. Profit taking in AI-related names and a strengthening dollar hurt the index.
- In Europe, equities rallied +2.8% in June. Europe is an industrial-heavy index and a falling oil price provides tailwinds to the region.
Fixed interest
- Global government bonds saw prices rise and yields drop throughout June, with thanks given to advancements in Iraning negotiations and oil falling.
- UK yields lowered at the end of June as oil price fell over the month. Gilt market reacted fairly neutral to Burnham being PM front runner. 10yr Gilt closed at 4.76%.
- US Treasuries remain focussed on inflation and fiscal risks rather than recession, with Walsh comfortable with rates being higher for longer. 10yr treasuries closed at 4.42%.
- Despite a positive month for bonds with yields falling, fiscal concerns persist given heavily indebted government balance sheets, particularly in the US.
- Among corporates, investment grade and high yield both saw small gains, with high yield spreads widening more than investment grade.
Other
- Sterling was broadly stable against major currencies despite intra-month volatility. GBP/USD ended at $1.32. GBP/EUR ended at €1.17.
- Oil prices retreated -23% in June, following -19% in May, closing at $72/bbl. Strait of Hormuz was formally opened following 60 day ceasefire, but tensions remain.
- Gold fell -10% in June and is now negative YTD. Gold, which is non-yielding, can struggle in a ‘higher for longer’ bond environment.
Would you like a second opinion on your investment performance? Get in touch by calling 03300 564 446, or use our contact form.
This article is for general information purposes only and does not constitute financial advice or a personal recommendation. Past performance is not a reliable indicator of future results. Investments can rise or fall in value, and you may receive less than you originally invested. Tax treatment depends on individual circumstances and may change in the future.
