UK consumer confidence rose to the highest level since November 2021
US labour data showed 272,000 jobs added in May, surpassing forecasts.
Mexico's markets declined after Claudia Sheinbaum's election win, raising concerns about potential constitutional reforms.
June was mixed for global equity markets. European equities declined due to political noise, with only technology and healthcare sectors posting gains. The UK market fell despite positive economic data. Asian markets, led by Taiwan and China, performed well, and emerging markets were positive. Fixed income markets also saw gains, particularly in global government bonds.
European equity markets declined in June with political noise making the headlines. All sectors posted negative returns, expect technology, which rose significantly, and health care. Real estate proved to be the weakest.
The far-right gained seats in the European Parliament, prompting President Macron to call a snap election in France, leading to market volatility.
The European Central Bank (ECB) began its easing cycle, cutting rates from 4% to 3.75% and suggesting future cuts will be gradual. The ECB also revised its Gross Domestic Product (GDP) forecast up from 0.6% to 0.9%.
The UK equity market declined in June despite positive economic data, as interest rates were kept on hold with the general election outcome due in July.
Inflation fell to 2.0% in May, meeting its target for the first time since July 2021, driven by a slowdown in food and non-alcoholic beverages and furniture prices.
The Bank of England (BoE) Governor Andrew Bailey welcomed the news that inflation had returned to its 2.0% target rate, but said they needed to be sure that inflation will stay low before cutting interest rates.
June saw positive returns across major US indices (S&P 500, Nasdaq, Dow Jones), all hitting highs, buoyed by enthusiasm for artificial intelligence. Sector performance varied, with technology leading gains while utilities and materials lagged.
The US Federal Reserve (Fed) maintained rates at 5.50%, signalling a single rate cut by year-end, surprising traders expecting more. This stance impacted President Biden’s economic management focus for re-election.
US labour data showed 272,000 jobs added in May, surpassing forecasts, but unemployment rose to 4.0%, slightly above expectations and previous figures.
Asia Pacific equity markets had a positive month, led by Taiwan and India, followed by Korea and Australia.
Korea's market saw gains driven by Samsung Electronics' potential chip supply deal with Nvidia. The Bank of Korea kept its base rate at 3.5%, monitoring inflation which remains above the 2% target despite gradual easing.
Japan's IT and financial sectors strengthened, supported by a weaker yen benefiting exporters, but also increasing import costs and inflation pressures. The Bank of Japan maintained its policy rate at 0.0-0.1%, as expected by markets.
Emerging equity markets saw gains in Asian and Emerging European markets but declines in Latin America and the Middle East. Taiwan and China performed well.
Latin American markets fell, with gains in Chile, Peru, and Colombia offset by losses in Brazil.
In Mexico, markets dipped as Banco de México kept rates steady at 11%, hinting at possible future cuts dependent on US policy.
In India, markets progressed amid volatility, led by industrial sectors. Despite volatility from elections, strong PMI readings suggest economic momentum and a positive outlook.
Global government bond markets rallied in June as several central banks, including the European Central Bank and the Bank of Canada, cut interest rates. Inflation data from the US and UK supported expectations of further rate cuts by the Federal Reserve and the Bank of England.
Corporate bond markets also had a positive month overall, despite widening spreads. Sterling-denominated investment grade bonds led followed by euro and then dollar bonds. Spreads widened slightly across these markets.
In the high yield corporate bond market, dollar bonds returned 0.97%, while European currency bonds (€/£) returned 0.59%. Spreads widened marginally for both dollar and European currency bonds during the month.
Global Fixed Income Strategy Monthly Report
In our regularly updated macroeconomic analysis we offer an outlook for interest rates and currencies – and look at which fixed income assets are favoured across a range of market environments.
Monthly fixed income update
June saw a resurgence in political risks with a snap election called in France, the upcoming general election for the UK, and the first televised debate between Trump and Biden ahead of the presidential election in the US. Read our latest thoughts on how fixed income markets performed during the month and what we think you should be looking out for in the near term.
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EMEA 3686938/2024
