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How have global financial markets performed?
What can we expect this month? - og img: /_assets/img/__news/2017.06.03-Markets-May/Last-Month-Market-Commentary.jpg - share tweet: Commentary from Courtiers Analyst James Timpson BSc Hons, IMC. - twitter summary: What were the big talking points last month?
What’s going on elsewhere?
How have global financial markets performed?
What can we expect this month?

June 2017 - Market Update

03 June 2017  09:40 GMT    James Timpson

The final round of voting in the French election took place last month and the winner, with 66.1% of the vote, was Emmanuel Macron of the En Marche! party. At 39, he is the youngest French president since Napoleon. In the days leading up to the final vote, the Eurostoxx index reached a two-year high. Following her defeat, Marine Le Pen returned to her role as leader of the National Front, having temporarily stepped down in April.

Inflation in the UK continues to climb, and the latest figures from the Office for National Statistics show that the Consumer Prices Index grew to 2.7% in April, up from 2.3% in March and the highest it has been since September 2013. Rising transport costs provided the biggest contribution to the level of inflation. Meanwhile the eight Monetary Policy Committee members of the Bank of England voted 7-1 in favour of keeping interest rates at their all-time lowest level of 0.25%.

In the US, there’s been more controversy surrounding Donald Trump. Last month he fired the director of the FBI, James Comey, over his handling of the inquiry into Hillary Clinton’s emails. Then last week it emerged that Trump’s proposed budget for 2018, entitled ‘A New Foundation for American Greatness’, contained a huge accounting error worth two trillion dollars. Throughout much of May, Donald Trump’s approval rating has been below 40%.

The UK general election takes place on 8th June. According to polls, the gap has been closing between the two major parties. Despite the uncertainty leading up to the election, UK financial markets have remained positive. The FTSE 100 index has reached new highs, breaking the 7,500 barrier for the first time. When the Conservatives won the last general election with a clear majority in May 2015, the index surged +2.3% in a single day, although it ended the month more or less flat.

May was a strong month for developed equity markets. In the UK, the FTSE 100 index surged +4.92%, and medium and smaller companies also performed well as the FTSE 250 (ex IT) index and the FTSE Small Cap (ex IT) index gained +2.01% and +1.78% respectively. In the US, the S&P 500 index picked up +1.41% while in Europe the Eurostoxx 50 index gathered +1.39%. Japanese equities, measured by the Topix index, grew +2.39%.

Emerging market returns were also mostly positive. The MSCI EM (Emerging Markets) index saw an increase of +2.48%. Chinese equities, represented by the MSCI China index, had a particularly strong month as they grew +5.44%. Latin American equities faltered slightly as the MSCI EM Latin America GR index slipped -1.99%. The IISL Nifty index, which measures Indian equity returns, gained +3.41%.

Global bond markets performed well during the month. UK government bonds, measured by the FTSE Gilts All Stocks index, rose +0.45%, and long dated (over 15 years to maturity) gilts grew +0.81%. In the corporate market, European corporate bonds, measured by the Markit iBoxx Euro Corporates index, gained +0.39% while sterling denominated corporate bonds, measured by the Markit iBoxx Sterling Corporates index, increased +1.33%. In the high yield markets, the Bank of America Merrill Lynch Euro High Yield index and the Bank of America Merrill Lynch Sterling High Yield index returned +0.88% and +1.15% respectively. Emerging Market sovereign debt, measured by the JP Morgan EMBI Global index, picked up +0.83%.

Commodities had a mixed month. The S&P GSCI index, which consists of a basket of commodities including oil, metals and agricultural items, fell -1.54%. The price of a crude oil contract went down -2.05%. In the agricultural market, corn gained +1.50% while wheat lost -0.69%. According to the S&P GSCI Gold and Silver indices, the two precious metals picked up +0.35% and +0.92% respectively.

In the foreign exchange markets, the pound has weakened slightly in the run-up to the election. Over the last month the US dollar, the euro and the yen have all appreciated against the pound by +0.47%, +3.54% and +1.10% respectively.

(All the above returns are reflected on a local currency basis i.e. they do not factor in any relevant currency movements. Unless accompanied by PR (Price Return), they do include income).

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