Market Commentary

Global equity markets for the most part continued their resurgence in June with a strong recovery, rebounding from the tariff-driven angst and geopolitical volatility arising from the conflicts between Israel/Iran and Russia/Ukraine, as well as the positive trade policy sentiment emerging from the US-China trade talks.

US markets had a strong month as the S&P 500 rose by 5.0%, the Dow Jones was up 4.3% and the Nasdaq being the best performer, rising by 6.6% for June. On the economic front, May US headline inflation (CPI) rose less than expected, printing at 2.4% YoY compared to the April reading of 2.3%, while core CPI, which excludes food and energy, remained unchanged at 2.8% YoY. Core personal consumption expenditure (PCE) for May, which is the Fed’s preferred inflation gauge, rose by a higher than expected 2.7% YoY, up from the revised 2.6% for April. The US first quarter GDP shrunk by 0.5%, with the tariff wars disrupting US business more than the previous estimate of 0.2%. At its mid-June meeting, the US Fed kept rates unchanged, while lowering its growth outlook for 2025, as well as raising its inflation forecast. Rhetoric from Fed Chairman Powell indicated that tariff increases are likely to boost prices, adding a more persistent effect to inflation. The release of the Fed members’ economic projections showed that most are still anticipating two 0.25% rate cuts in the second half of the year. However, there is a rising sentiment that it may be appropriate to leave the rates unchanged for the rest of the year. Despite US inflation trending back towards the Feds 2% target range, members are anticipating a reversal of the trend as the impact of the tariff wars start to take effect over the next few months, which accounts for the lack of rate cuts in the US.

The UK market ended the month unchanged from the previous month, while inflation in May slowed in line with expectations, printing at 3.4%, from the April reading of 3.5%, with core inflation at 3.5% in May compared to the April reading of 3.8%. Chancellor of the Exchequer, Rachel Reeves, had to grapple with fiscal challenges in attempting to balance Labour’s fiscal rules amid political turmoil, as a rebellion by over 120 Labour MPs forced concessions as well as heightening the possibility of future tax hikes. Two concessions were a U-turn on means testing the winter fuel payments of pensioners which cost £1.25 billion, as well as a watered-down welfare reform bill applicable only to new disability claimants from November 2026, resulting in a budget deficit of £4.25 billion.

European markets had a mixed June, impacted by trade tensions, geopolitical risks, and a mixed bag of economic data. Added to this, tariff uncertainty ahead of the 9 July deadline also tempered market expectations. The Dax declined by 0.4% for the month, while the CAC closed lower by 1.1%. Inflation in the eurozone printed at 1.9% YoY vs the April print of 2.2% and dipped below the ECB’s target of 2.0% for the first time since September 2024. Core inflation eased to its lowest level Since September 2022, printing at 2.3%.

Asian markets had a strong June as Chinese stimulation efforts (better fiscal policies and monetary easing), aimed at boosting local demand and stabilising the under-pressure property market, impacted positively. The Hang Seng ended the month higher by 3.4%, while the Shanghai Composite ended firmer by 2.9%. Chinese official manufacturing PMI for June improved slightly to 49.7 vs. the May reading of 49.5, while the non-manufacturing PMI printed at 50.5 vs the 50.3 reading of May.

In Japan, the Nikkei ended the month higher by 6.6%, notwithstanding the continued concerns the negative impact the US tariffs might have on the Japanese economy. Core inflation in Japan for May accelerated for the third month in a row, printing at 3.7% YoY vs the April reading of 3.5% - above market expectations and adding to expectations that the BoJ may tighten monetary policy further to address concerns regarding inflationary pressures. The uptick in inflation was driven largely by a 102% spike in rice prices and required the release of emergency rice stockpiles. The BoJ kept rates at 0.5% while maintaining caution due to the uncertain trade climate and reducing Japanese government bond purchases to stabilise yields.

South Africa

Our local market had a solid June, with the ALSI ending the month higher by 2.2%, with resources up 4.8%, in the vanguard of the gains. This was followed by industrials, up 2.2%, financials, up 0.8%, though the property sector lagged the market, declining by 1.4% for the month. Selected top performing shares for the month were Telkom, up 38.6%, platinum share Tharisa (up 28.1%), Northam (up 26.6%), and Implats (up 23.1%) on the back of a platinum price that was stronger by 28.5% from the previous month. We also noted strength in We Buy Cars (up 21.9%), MAS PLC (up 20.7%), Sibanye Stillwater (up 17.7%), Ninety-One (up 13.8%).

Selected underperforming shares were KAP (lower by 19.0%) on the back of an earnings warning, Sappi (down by 13.8%), Woolworths (down 11.7%), DRD Gold (lower by 11.1%), and Burstone and Equites, lower by 10.5% and 9.3% respectively.

On the local economics front, headline inflation for May remained steady at 2.8% YoY (unchanged from the April reading), with core inflation also unchanged at 3.0% YoY for the same period. Inflation data shows that core prices remain comfortably under control, at the bottom of the SARB’s target range and slightly below market expectations.