
Monthly Market Roundup cov. June 2023
In our monthly market roundup covering June, Invesco experts review a more positive month for global stock markets, and what the key influences were. Read the PDF for more.
Bank of England raised interest rates to 5%, while the European Central Bank rose by 0.25%
UK inflation was unchanged and stubbornly high, but for the US and Europe inflation is falling
Global equity markets were positive in June, but government bonds were under pressure
June was a largely positive month for global equity markets, with all major regions bouncing back from May losses. Inflation is moderating in Europe and the US, with the later having paused interest rate hikes after the last Federal Reserve meeting. The European Central Bank and Bank of England are set to continue their rate hikes for the time being. Fears around the post-covid economy in China persist but didn’t prevent the country’s gains. Elsewhere in Asia Pacific, Australia, Japan and India were strong performers. Fixed income markets stayed under pressure on the basis of more interest rate hikes from some central banks.
European markets ended June up, although GDP figures were revised down, reflecting the fact that inflation continues to fall. It hit the lowest level since January 2022 last month, down by 0.6%, below consensus estimates. Core inflation (which excludes food and fuel) was up slightly though, by 0.1%.
The European Central Bank (ECB) continued its series of interest rates hikes by putting rates up by another 0.25% last month. The bank is ‘very likely’ to raise them again in July.
Revised Eurostat data showed that the Eurozone is in a mild technical recession as GDP contracted for two consecutive quarters between 2022 and the start of 2023. The Organisation for Economic Co-operation and Development (OECD) still expects the region to grow by the end of the year though.
UK equities also ended the month up, off the back of positive economic data. Data showed that UK GDP grew by 0.2% in April, in line with estimates. The services sector was the main contributor, as hopes remain high that the country will avoid a recession this year.
Inflation remains stubborn. It stayed at 8.7% though forecasts predicted a fall. Core inflation went up, driven by rising air fares and an increase in live music events. The Bank of England enacted its 13th straight interest rate hike, by more than expected at 0.5% as the battle against inflation continues.
Sterling rose to its highest level against the dollar since early last year and UK retail sales beat consensus estimates to grow by 0.3% in May. The warmer weather is thought to have driven this, as people purchased summer and outdoor goods.
June was positive for US markets as the Dow Jones, NASDAQ and S&P500 all gained ground across the month. The newly passed debt ceiling provided a boost, as the US was able to avoid what would have been a historical default.
US inflation continues to moderate and is at its slowest pace in two years. Year-on-year CPI beat forecasts, coming in at 4%. In response, the Federal Reserve paused its interest rate hiking cycle in June, boosting sentiment around the economy.
US jobs growth was almost twice as strong as expected. This means the labour market is showing signs of resilience as figures for the previous two months were also revised upwards. Unemployment did rise in May though, by 0.3%.
Chinese equities gained despite negative economic data regarding industrial production and disappointment over government efforts to revive the economy through proactive easing or rate cuts. The gains were due to strong contributions in the real estate, communication services and consumer discretionary sectors. The detractors were healthcare, utilities, finance and industrials.
In Australia, there was positive economic data on the labour and inflation front. Unemployment fell from 3.7% to 3.6%, beating expectations of 3.7%. Annual inflation fell from 6.8% to 5.6%, lower than analysts’ forecasts of 6.1%. However, the Reserve Bank of Australia opted to raise interest rates to 4.10%, despite the good news on inflation.
Equity markets in Thailand and Malaysia lagged their Asia Pacific peers. Malaysian equity markets experienced significant declines in health care and communication services, while in Thailand utilities and information technology underperformed.
Equity markets in Latin America led the way for emerging markets. Brazil first quarter GDP showed an increase of 4%, above analysts’ forecasts of 2.7%, while May inflation data came in below market expectations of 3.94%. Brazilian equity markets were up 16.1%, with energy stocks Petrobras and Cosan up more than 25% in June.
South Korean equities edged up slightly. Economic data out of South Korea showed that annual inflation for May fell by 3.3% from 3.7%. This was in line with expectations.
In emerging Europe, Poland and Greece were top performers. Poland’s year-on-year May inflation figure fell to 13% from 14.7% previously. Poland’s May unemployment rate fell from 5.2% to 5.1. In Greece, equity and bond markets responded positively to news that the Kyriakos Mitsotakis and his centre-right party New Democracy won by a landslide in the snap parliamentary election.
Government bonds were under pressure on likelihood of further interest rate hikes as central banks grapple with sticky inflation or sustained increases in prices.
It was a mixed month for corporate bond markets with dollar-denominated credit registering gains, but overall returns held back by weakness in sterling investment grade bonds.
Performance in the high yield market was positive.
Monthly Market Roundup cov. June 2023
In our monthly market roundup covering June, Invesco experts review a more positive month for global stock markets, and what the key influences were. Read the PDF for more.
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