In June, Europe was the scene of most of the action in financial markets. For the first time in five years, the ECB cut policy rates (from 4.0% to 3.75%). In addition, the results of European elections were not well received by investors: in particular, equities Europe lagged significantly behind other developed markets. French government bonds were even under pressure after national elections were called following the results of the European elections in France. After falling in May, oil prices picked up a few percent.
Equities
For equities in general, June was a fine month. However, there were some big differences between regions, both within developed and emerging markets. The broad MSCI All Countries World Index (developed + emerging markets combined; measured in euros) posted a return of +3.5% in June. It remains somewhat of a sticking point between emerging and developed markets. Now it was again emerging markets (+5.3%) that outperformed developed markets (+3.4%). Within developed markets, we saw Europe (-1.0%) suffer from the election results. Japan (+0.6%) and Pacific excluding Japan (+1.6%) lower moderately positive. North America (+4.6%), however, was the big winner in June. Among emerging markets, Latin America (-4.9%) and to a lesser extent China (-0.6%) were the dissonants. Asia (+6.3%) and EMEA (+5.2%) posted handsome pluses for the month. Styles growth stocks (+6.2%) again significantly outperformed style value stocks (+0.8%).
Bonds
As mentioned above, French government bonds (+0.16% to 3.30%) suffered following the elections. Other developed countries showed declining interest rates over the past month. The 10-year US rate fell 0.10% to 4.40%. This decline was about the same as Dutch government bond yields (-0.11% to 2.84%). The 10-year rate on German government bonds declined slightly further: -0.17% to 2.50%. The picture was less rosy for bonds with a higher risk profile. Less risky corporate bonds showed an increase in the risk premium of 0.09% (to 1.16%). This was slightly higher than for more risky corporate bonds: here the increase was 0.04% (to 3.37%). For emerging market government bonds, the risk premium increased by 0.11% to 3.92%.