Market Pulse - June 2019

The MSCI AC World equity benchmark rose 3.4% (2.3% in euro terms), while the Pacific Basin ex Japan rose 5.8% (3.7% in in euro terms). Australia outperformed, aided by becoming the first G10 country to cut interest rates this year.

European ex UK equities rose 4.9% (also 4.9% in in euro terms), supported by speculation of more policy easing by the European Central Bank (ECB) and the increased attractiveness of equities relative to bonds.

Japan lagged, falling -1.6% (-0.4% in in euro terms), and the stronger yen negatively affected exporters.

Emerging markets underperformed too, rising 0.3% (-0.7% in in euro terms) on the back of rising trade tensions.

The ICE BofA Merrill Lynch Eurozone > 5-year sovereign bond benchmark rose 5.0%.

The German 10-year yield ended the quarter in negative territory at new all-time lows of -0.33% as economic sentiment readings disappointed, suggesting that growth would be subdued.

Peripheral yield spreads continued to narrow, given the attractive yield pick-up available in an environment of declining yields.

At quarter-end, Spanish 10-year spreads against Germany had fallen to 73 basis points (bps), while Portuguese spreads had declined to 80bps.

Despite a stand-off with the EU in relation to fiscal targets, Italian spreads also narrowed to 243bps over the quarter.

 

 

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