During the month of June, the attention of financial markets again focused mainly on inflation figures. These figures presented a mixed picture in terms of regions, but also by type. For example, “normal” inflation declined somewhat, but “core” inflation (inflation minus cyclical elements such as food and energy) rose somewhat. How central banks will respond remains to be seen. In response, we saw short-term interest rates rise slightly and long-term rates fall slightly. Other markets were positive with falling spreads and strong positive returns in equity markets. The commodity index was slightly lower across the board, but commodities linked to the Ukraine war (e.g. oil, gas and grain) were an exception. The euro appreciated against most currencies.
Shares
June was a good month for equities with a 3.4% return for the MSCI All Countries World Index rose (measured in euros). Emerging markets (+1.4%) did significantly less well than developed markets (+3.6%). Within developed markets, the best result was for North America (+4.2%), followed by Japan (+3.1%), Europe (2.4%) and Pacific excluding Japan (1.9%). Within emerging markets, the spread was considerably wider. Asia still just achieved a positive return of 0.4%, but Latin America gained as much as 9.5%. IT and consumer luxury goods were the best performing sectors in June, while utilities and telecom lagged behind. ‘Growth’ and ‘value’ did not differ much.
Bonds
Interest rates picked up somewhat more in the U.S. than in Europe in June. German 10-year rates rose 0.11% to 2.39%, slightly more than Dutch 10-year rates (0.09% to 2.74%). In the U.S., however, 10-year rates rose 0.19% to 3.84%. Investors were willing to take more risk; risk premiums decreased significantly over the past month. The premium for less risky corporate bonds fell 0.08% to 1.61%. For more risky corporate bonds, this decline was much stronger (-0.61% to 4.49%), also more than for emerging market government bonds (-0.45% to 4.32)%.