Overview

Worldwide equity markets continued their gains in June, with broad market indices ending Q2 2019 higher as the U.S.’s S&P 500 index set a closing record. Underlying geopolitical issues remain, which affect the performance of main market indices. A temporary Trade War truce was declared between the U.S.—China, Britain’s search for the next Prime Minister is down to two candidates and protests erupted in Hong Kong.

UK

Britain’s FTSE 100 index was up just shy of 4% over June, Sterling’s fluctuation against foreign currencies was minimal over the month, gaining against the U.S. Dollar (+0.5%) but down against the Euro (-1.2%). Primary U.K. movements over the month were based on market pricing of the most likely outcome of Brexit.

The Conservative Leadership contest has been whittled down to two candidates—Jeremy Hunt and Boris Johnson—one of whom will be Britain’s next PM. Both are positioning different visions for Brexit, particularly a ‘No Deal’ scenario, which markets factor into their pricing of asset classes. ‘No Deal’ is, generally, seen as the worst outcome due to its unpredictable nature and potential impact on the U.K. economy, U.K. Gilts at +0.16%.

US

The biggest U.S. news came from the G20 summit, whereby China and the U.S. agreed to a temporary Trade War truce and to restart trade negotiations which equities saw as a positive step towards a full resolution. As a result, the U.S.’s benchmark index, the S&P 500, was up just shy of 6% over the month in Sterling terms.

Rising equities resulted in slightly lower fixed interest bonds, U.S. 10 Year Treasury Notes were down 0.8% over the month in Sterling terms. Gold Bullion was +8.3% for the month in Sterling, as a ‘safe-haven’ asset class it is investors preference during political and financial uncertainty, increasing its demand and price per Troy Ounce.

Emerging Markets

Emerging Markets performed well over the month, with the ‘MSCI Emerging Markets’ index at +5.2% in Sterling terms. China will benefit from the U.S. Trade War truce and if a mutually acceptable trade deal can be negotiated between the two sides. Hong Kong, a Chinese territory, broke into protest over a controversial law.

Month and Q2 Summary

In summary, the month’s activity which concluded Q2 2019 was broadly positive for markets. Potential resolution to ongoing geopolitical issues will assist in maintaining higher levels. Movements for the next half of 2019 will depend on whether global economic expansion continues, or if it begins to slow. Central Banks keep a close eye on inflationary pressures and domestic economic data to support Governmental ambitions.