June 2018 market overview
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The American economy strained under the revived discussions on trading tariffs for US aluminium and steel imports. Neighbouring countries Canada and Mexico responded in turn, with Canada issuing retaliatory tariffs and Mexico threatening to increase tariffs on agricultural produce. Trump also suggested that China, the EU and UK will face protectionist action, further reducing investor confidence in global markets. The Dow Jones Index suffered three weeks of losses, but spiked in the month’s last three days mainly due to a strong performance by Nike.
The European economy has largely stabilised following the conclusion of the immigration deal that relieves pressure from countries such as Italy and Greece that received the greatest influx of immigrants. Following three months of negotiations, Italy’s coalition between two governmental parties, the Lega and 5-Star Movement, and Spain’s removal of Prime Minister Mariano Rajoy, have further helped to settle the Eurozone.
The UK continues negotiations with the Eurozone, alongside negative growth in exports and real wages, and a declining pound over the last quarter. The pound dropped to its lowest point in seven months on 28 June, ahead of continued Brexit talks.
Locally, the markets took an upturn, despite South Africa experiencing an outflow from bond and property investments. The listed property sector remained under severe pressure as discussions over land appropriation without compensation stall foreign investors. Other members of the emerging markets brought down June results overall, as Argentina and Turkey were scrutinised for political unrest and wage disputes.
During June 2018 the FTSE/JSE All Share Index (ALSI) gained 2.8% on a total return basis, while bonds lost 1.17%. The SA Listed Property Index (SAPY) lost 3.45% in June, down 21.36% from the start of the year. Cash returned 0.57%. Internationally, the MSCI World Index stagnated with -0.05% change and the MSCI Emerging Markets Index ($) lost 4.1%. During June the rand weakened 7.6% against the greenback and lost 7.62% against the euro.
For the year to date index measures, the ALSI returned -1.7%. The ALBI returned 4.0% and cash 3.54%. Internationally, the MSCI World Index rewarded offshore investors with 0.43% while declining in the MSCI Emerging Markets Index ($) with -6.64%. But the weakening of the rand against all major currencies during the first six months of 2018 would have given South Africans’ offshore investments a boost.
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