In a landmark year – notable for the sheer number of elections around the world – share prices in Europe were knocked during June by French President Emmanuel Macron’s surprise announcement of a snap poll.
- The ECB implemented a 25bp rate cut
- The Fed expects to make just one cut this year
- The yen continued its decline
Snap election for France: in a landmark year – notable for the sheer number of elections around the world – share prices in Europe were knocked during June by French President Emmanuel Macron’s surprise announcement of a snap poll. Uncertainty drove the CAC 40 Index down by 6.4% over the month, while Germany’s Dax Index fell by 1.4%.
“Overall, our confidence in the path ahead … has been increasing” (ECB President Christine Lagarde)
ECB cuts: in a widely expected move, the European Central Bank (ECB) announced a cut of 25 basis points in its key interest rate, reducing it to 3.75%. ECB President Christine Lagarde said the inflation outlook had improved “markedly” but remained cautious, warning that inflation was likely to stay above target “well into next year”. Nevertheless, she commented: “Overall, our confidence in the path ahead … has been increasing”. The eurozone’s rate of inflation rose from 2.4% year on year in April to 2.6% in May
Tech sector surges ahead: in the US, the technology sector experienced a rollercoaster month as chip maker Nvidia first fell sharply on profit taking and then rebounded alongside other mega-cap peers. Over June as a whole, the technology-heavy Nasdaq Index rose by 6%, while the Dow Jones Industrial Average Index climbed by 1.1%.
Just one cut this year? The Federal Reserve (Fed) maintained its key federal funds rate at a range of 5.25% to 5.5% in June and indicated that it is set to cut rates just once this year. Despite acknowledging that inflationary pressures had “eased substantially”, Fed Chair Jerome Powell maintained that inflation remains too high, and warned that policymakers need “more good data to bolster our confidence”. The annualised rate of consumer price inflation eased from 3.4% in April to 3.3% in May, but remained well over its 2% target. Nevertheless, the personal consumption expenditures index fell to 2.6% in May, fuelling expectations of a cut this year.
Yen weakness continues: Japan’s headline rate of inflation rose by 2.8% year on year compared with 2.5% in April, while core inflation climbed by 2.5% compared with 2.2%. At their June meeting , Bank of Japan policymakers pondered the possibility of an interest rate increase, but opted to maintain the country’s key rate at 0% to 0.1%. Elsewhere, persistent weakness in the yen sparked speculation that the country’s authorities might intervene once again to prop up the currency. The Nikkei 225 Index rose by 2.8% during June.
To view the series of market updates through June, click here
