Market Summary | June 2019
MARKET OVERVIEW
Markets responded well in June following a disappointing May. Performance was largely impacted by central banks continuing to weaken their tightening stance, whilst trade tensions appeared to ease following the G20 summit held in late June.
Stock markets also overcame news from the World Bank, who suggested that the global economy was weakening. It is now predicting global growth of just 2.6% in 2019, and a very slight increase to 2.7% in 2020. Inevitably ‘international trade tensions’ were to blame.
UNITED STATES
Donald Trump ticked a visit to North Korea off his bucket list, dropping by to catch up with communist leader Kim Jong-Un at the North/South Korea border. The historic moment meant Trump was the first US president to ever set foot inside North Korean borders.
US unemployment remains at a 50-year low of 3.6%, however inflation and wages growth has been declining. As broadly expected, the Fed left the funds rate on hold at its June meeting, but hinted at rate cuts in the near future.
US stock markets rallied well throughout June after a difficult May, recording the best June numbers in more than 80 years. Apple rallied well (+13%) following a brighter trade war outlook, whilst Facebook gained (+18%) off the back of the launch of their new cryptocurrency Libra, the currency will go live in 2020.
The S&P 500 Index (USD) returned 6.89%
The Dow Jones (USD) returned 7.19%
ASIA
The Hong Kong/China extradition debacle dominated headlines in June as Hong Kong sought to pass legislation allowing extraditions to mainland China. This sparked huge debate, protests and some of the worst violence in this part of the world for some time. Despite the issue going unresolved, the local stock market climbed 6.10% for the month of June.
The Chinese economy remains weaker by historical standards with industrial activity remaining very subdued despite the range of stimulus provided over the last 12 months. On the trade war front, President Trump’s decision to ease restrictions on Chinese carrier Huawei may indicate some progress is being made towards an agreement.
The Hong Kong Hang Seng PR Index (HKD) returned 6.10%
The Nikkei 225 PR Index (JPY) returned 3.28%
The Shanghai Shenzhen CSI 300 PR Index (RMB) returned 5.39%
EUROPE
Across Europe, the resources sector (+9.5%) was the top gainer among the index, while auto stocks (+6.7%) recovered from the trade woes of the previous month. Banks (+1.6%) were positive over June but still struggling as markets anticipate a fall in interest rates.
In Germany the services sector continues to grow on the back of strong domestic demand, while manufacturing is contracting at the fastest pace since 2012, with employment falling the most in over six years.
The race to succeed Theresa May is now down to two frontrunners, Boris Johnson and Jeremy Hunt. The final decision will be taken by Conservative Party members, with the result to be announced by the 23rd of July.
The UK’s FTSE 100 PR Index (GBP) returned 3.69%
The German Dax (EUR) returned 5.73%
AUSTRALIA
The big news in Australia is the RBA’s switch to rate cutting mode, with two cuts to the cash rate over June and July to a record low 1.00%. The minutes of the June meeting point to concern about the US-China trade dispute, while domestically, the decline in dwelling investment has had an impact on economic growth. The prospect of sub-1.0% cash rates has further undermined the Australian dollar and driven investors towards higher yielding financial assets.
Australian shares pushed higher through June on the back of improving sentiment around global trade and a rallying US market. The S&P/ASX 200 Index returned 3.7% over the month, finishing above 6,600 points and moving above 6,750 early in July, pushing closer to its 2007 record high.
The materials sector led the way with strong gains from Newcrest (+17.4%) Fortescue Metals (+12.1%) and BHP (+9.00%). Industrials also had a strong month as Sydney Airport climbed 8.5% after announcing a rise in domestic passengers over June and a turnaround on international visitor numbers.
The best performing stock from the index was Nanosonics (+24.9%), rising to an all-time high as investors were drawn to the company’s impressive half-year results and the growth potential for its disinfection technology. Vocus Communications (-28.76%) was the index’s worst performing stock, investors were quick to exit as the takeover offer from AGL Energy collapsed abruptly in mid-June.
MARKET RETURNS (LAST 12 MONTHS)
Recent performance has pushed the return of international equities ahead of Australian equities. Performance from equities remains in positive territory whilst returns from Cash remain somewhat suppressed.
The above graph summarises the performance of the major financial markets and gives you an indication of how these markets performed over the last 12 months. The graph does not reflect your actual portfolio performance.