Monthly market roundup – June

by InvestEngine

Welcome to the latest edition of our monthly market roundups.

June brought with it positive headlines on the battle against inflation, with the Bank of England reaching its 2% target level and the US continuing to make progress in the same direction. However, some underlying components of inflation proved stickier than expected, tempering investors’ expectations for earlier rate cuts. As ever, technology companies continue to lead the market rally. 

In our ‘Off the beaten track’ section, find out about which country generated over 20% of its government’s revenue from the sales of its domain registrations, who’s being fired for using mouse jigglers, and how a former hedge fund trader amassed a $185m burrito fortune. 

Inflation continues to fall

It was welcome news for both the Bank of England and for Rishi Sunak as it was announced in June that headline UK inflation had finally fallen down to the central bank’s target rate of 2%

While that was in line with the market’s expectations, it still marked the first time inflation had been at 2% since July 2021. The rate was driven lower by food and drinks inflation falling. 

However, the news wasn’t all good. Services inflation fell by less than expected, dropping to 5.7% compared to 5.9% in the previous month, being driven by higher prices for airline tickets and accommodation. Core inflation, which strips out food and energy, fell to 3.5%, down from 3.9% in April but still higher than expected.

Because of this sticky services and core inflation figures, the market lowered its bet on the first interest rate cut being delivered by the BoE’s August meeting to around a third, down from a 45% chance immediately before the inflation figure was published. 

Source: Bloomberg

The US also saw good inflation news in June. US CPI cooled to the lowest pace in over 3 years, down at 3.3% and slightly lower than the market predicted. However, with consistently strong economic and employment data coming out of the US, combined with the Fed’s insistence that they will wait for evidence of prolonged lower inflation before they start cutting rates, markets are still not expecting a slew of rate cuts any time soon. 

Interest rates on hold

Despite the good inflationary news, the Bank of England decided to keep rates on hold, as expected. None of the members provided any strong hints when it might start cutting rates, and the same seven (out of nine) MPC members supported the decision to keep rates on hold at 5.25%. 

Minutes of the meeting showed that some MPC members who voted to hold rates judged the decision “finely balanced”, which was interpreted as a sign they are getting close to voting for a cut. 

Despite the higher services inflation figure for May, the group maintained that this “did not alter significantly the disinflationary trajectory that the economy was on”.

Source: Bloomberg

The BoE’s decision leaves it lagging behind the European Central Bank and the Bank of Canada, which have already begun lowering interest rates. By contrast, the US Federal Reserve has also kept rates on hold so far, with its latest forecasts suggesting it may only cut once this year.

Technology leading the way

June was a mixed month for equities, with the US (as ever) leading the charge. The US market rose 4.3% for the month, yet again propelled upwards by the largest tech stocks. There was some jostling for position as the world’s largest company, with the top 3 spots at the end of the month going to Microsoft, NVIDIA, and Apple respectively. All now have market capitalisations above $3trn. 

Emerging markets also performed well in June, up 4.7% in sterling terms, with strong performances from their own technology stocks including Taiwan Semiconductor Manufacturing Company (TSMC) and Hon Hai Precision Industry (aka Foxconn). 

The UK and Europe, due to their lack of technology companies and fears surrounding the French snap election, both fell slightly over the month at -1.0% and -1.5% respectively. 

Source: Bloomberg

Yields fall

Short-term UK bond yields fell in June, as these yields tend to follow movements in interest rate expectations. The stronger-than-expected core and services inflation data strengthened the “higher for longer” interest rate narrative, and pushed back expectations for rate cuts, which caused yields to fall over the month from 4.4% to 4.2%. 

Longer-term yields, which tend to be more sensitive to expected long-term inflation rates, followed suit, falling from 4.3% at the start of the month to finish at 4.2%.


Source: Bloomberg

Sterling falls versus the dollar

Following the release of the inflation data in both regions, sterling fell versus the dollar in June, falling from a rate of $1.27 to finish the month at $1.26. 

Versus the Euro, sterling strengthened slightly over the month, finishing at a rate of €1.18. 

Important information

Figures taken from Bloomberg 01/07/24

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Off the beaten track

This country generated over 20% of its government’s total revenue in 2023 from the sales of its .ai domain registrations. 

In more bad news for Wells Fargo, the bank announced last month that over a dozen employees were fired after investigating claims that they were faking work. They had been found to be using “mouse movers” or “mouse jigglers” to simulate keyboard activity. 

This former hedge fund trader is now taking over the Mexican food scene in Australia, having now amassed a $185m burrito fortune

NVIDIA, the poster child for the AI boom and driving force behind the US market’s rally, is facing a difficult problem. Its share price has performed so well that most of its employees are now millionaires. While this may appear to be beneficial for the company, in reality its CEO is bemoaning the fact that many of the company’s highest-performing employees are now “semi-retiring”. 

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