Market Review June

UK

The FTSE All-Share Index rose 3.7% in sterling terms during June, as stocks were boosted by expectations of looser monetary policy from central banks. Market expectations firmed for an interest rate cut from the US Federal Reserve (Fed) in July, while comments from European Central Bank (ECB) President Mario Draghi suggested the ECB was considering resuming its bond-buying programme. The Bank of England, meanwhile, warned UK economic growth would likely fall to zero in the second quarter versus the 0.5% pace of the prior quarter, though kept its guidance and interest rates on hold. Survey data for June indicated UK manufacturing activity had fallen to its lowest level in six years as Brexit-related uncertainty took its toll. In terms of sectors, industrial metals & mining (14.9%) led over the month, while technology hardware & equipment (-9.0%) sharply underperformed.

FTSE All-Share Total Return (TR) GBP (%)*

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Europe

The FTSE World Europe ex-UK index rallied 6.4% in sterling terms. European shares were boosted by comments from ECB and Fed officials pointing to looser monetary policy. ECB President Mario Draghi suggested the ECB was considering resuming its bond-buying programme. Market expectations firmed for an interest rate cut from the Fed in July as the latter highlight a fragile global growth outlook. Eurozone inflation fell from 1.7% in April to just 1.2% in June, according to official estimates, well below the ECB’s 2% target. Germany’s ZEW economic sentiments index fell sharply in June, as trade concerns, geopolitical uncertainty and Brexit weighed. Italian assets were buoyed by reports that the European Commissions would not sanction Italy in the near term for breaching EU budget rules.

FTSE World Europe ex UK TR GBP (%)*

US

The FTSE All-World North America Index advanced 5.9% in sterling terms over June. US stocks rallied sharply as market expectations firmed for a Fed interest rate cut in July, with Fed Chairman Jay Powell warning that downside risks to the global growth outlook had increased. Towards month-end, stocks were additionally boosted by hopes that the US and China were about to restart trade talks, an outcome that was confirmed at G20 summit in late June. Underlying US inflation remained muted, with the core personal consumption expenditures index at 1.6% in May, unchanged from the prior month. US retail sales rose 0.5% in May, suggesting US consumers had been largely undeterred by the recent escalation in the US/China trade war. Survey data also indicated that US service sector growth had risen in May.

FTSE All-World North America TR GBP (%)*

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*Source: Lipper to 28 June 2019, total return. Indices rebased to zero at 31 May 2019.

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