TheRussian invasion of Ukraine continues and continues to have its impact on financial markets. In particular, energy prices remain at high levels and we see this confirmed in the latest inflation figures. After previous policy rate hikes by the Fed, the U.S. central bank, the ECB now seems to be hinting at policy rate hikes as well. There was also attention on the difference of borrowing costs for governments. There was a threat of fragmentation between northern (strong) countries and southern ones (especially Italy and Greece); this is because government bond yields for the latter were rising faster than northern countries. ECB President Lagarde announced after an called-in meeting that the ECB will buy bonds from Italy and Greece to reduce their interest rate burden.
Shares
June was downright a bad month for equities. The MSCI All Countries World Index fell a whopping 6.2%. Europe fell 7.7%, North America 6.2% and Japan 5.6%. Emerging markets (-4.3%) did relatively best. North America did a little less with a negative return of -1.7%. The positive outlier was China (+9.2%); easing lockdowns related to corona were behind this. Value stocks (-6.3%) and growth stocks (-6.0%) did not differ much this month. Defensive sectors such as consumer staples (-1%) and health care (-0.6%) performed least poorly this month
Bonds
The bond markets, under pressure from central bank policies, also continued to see wide swings. During the month of June, interest rates continued to rise across a broad front. The German 10-year rate rose 0.22% to 1.34%, as in the U.S. where the 10-year rate is now already above 3% (3.02%); up 0.17%. The risk premium for less risky and more risky corporate bonds rose sharply to 2.12% (+0.52%) and 6.48% (+1.69%) respectively, yielding negative returns for the month of June.