Global Market Commentary – June 2019

As trade wars threatened to derail global economic growth, major central banks suggested they were ready to provide support in the form of lower rates. Markets rallied early in June as the US Federal Reserve (Fed) President Jerome Powell, said he stood “ready to act” and the official Fed meeting later in the month showed he had plenty of support for that notion, with half of the Federal Open Market Committee (FOMC) members suggesting the most appropriate path forward was for lower US interest rates. Meanwhile, US Treasury Secretary Steven Mnuchin, added fuel to the rally when he suggested late in June that a trade deal with China was “90% complete” (after markets closed for the month the US and China agreed to hit pause on the trade war). This was enough to drive most equity markets comfortably higher in June, pushing them back into positive territory for 2Q19.

Developed markets outperformed emerging markets for the fifth consecutive month, although in June this was mostly due to a negative month for Indian equities, which finally took a breather from the rally driven by the re-election of Prime Minister Narendra Modi. Large-cap US tech stocks have been a key driver of global markets for the last few years but, during June, US regulators announced a plan to investigate anti-competitive conduct amongst these companies. Most of this grouping saw their share prices fall by high-single-digits on the news. Facebook’s announcement of the launch of Libra, a virtual currency, was enough to entice investors back and Apple held a successful developers conference which also helped it find support for its share price. Google was the only one of the FAANGs (Facebook, Apple, Amazon, Netflix and Alphabet’s Google) that failed to recover from its anti-trust sell-off.

With dovish central banks the order of the day, US 10-year bond yields dropped further, briefly edging below 2% during the month, the first time 10-year rates have breached this level since before US President Donald Trump’s election in November 2016. Interest rate markets are now pricing in expectations for almost three US rate cuts by year-end. Commodity markets were subdued, though falling interest rates helped drive the price of gold up 8% during the month (the highest level it has been since 2013). The US dollar was weaker against most currencies in June.

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