Research Insights | Market Commentary June 2024
In June US inflation for the year to May was released with the annual rate of inflation falling to 3.3% (down from 3.4% the previous month) which is still much higher than the US Federal Reserve’s targeted 2% inflation rate. US bond yields responded favourably to the improved inflation data over the month.
Australian inflation data in May came in at an annualised rate of 4.0% which was slightly ahead of expectations and moved up from an annualised rate of 3.6% in the 12 months to April 2024. The stronger than expected CPI quashed hopes of a cut in the Reserve Bank of Australia (RBA) cash rate in the next few months and increased the probability the RBA may need to raise rates at its August meeting.
Australian large cap equities rose by 1.2% led by the Financials and Consumer Staples sectors. US equities were again strong led as the Artificial Intelligence thematic continued to resonate with investors and propelled NVIDIA to become the world’s largest listed company with a market capitalisation that breached the US$3 trillion level. The European Central Bank (ECB) reduced its key deposit rate by 0.25% to 3.7% in June, the first cut to rates since 2019. Similarly, the Bank of Canada reduced its overnight rate to 4.75% from 5.0% in June which was the first cut since March 2020. Hedged global equities rose by 2.29% whilst unhedged global equities rose by 1.61%, the Australian dollar strengthened by 0.3% in June buying US$0.6670.
The Australian 10-year government bond yield fell by 10bps to 4.31% whilst the Australian 2-year government bond yield rose by 4 bps to 4.16%. The US 10-year government bond yield fell by 10bps to close at 4.40% and the US 2-year government bond yield fell by 12 bps to 4.75%.
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