Pressure from two sides

In June, the US Federal Reserve raised key interest rates by 75 basis points to combat rampant inflation in the US. In Europe, too, the European Central announced a departure from its zero interest rate monetary policy. High inflation also weighed on consumer sentiment and the mood of purchasing managers.

The international stock markets again suffered heavy losses in June - with the exception of China and Hong Kong. The German stock index DAX lost -11.15% and thus achieved an even weaker result than the broad European index Stoxx Europe 600 with -8.15%. In the USA, the S&P 500 fell by -6.22%. In contrast, Hong Kong's Hang Seng Index rose by 4.50%. Overall, global equities, as measured by the MSCI World, fell by -8.77% - all index figures in euro terms.

The persistently high inflation put pressure on the stock markets from two sides:

On the one hand, the US Federal Reserve attempted to curb inflation, which was 8.6% year-on-year in the USA at the end of May, through an increasingly restrictive monetary policy. In June, it raised the US key interest rate by 75 basis points to a range of now 1.50% to 1.75%. Meanwhile, the European Central Bank has also announced a move away from zero interest rates to counter inflation in the euro area (8.6% at the end of June). Market participants expect the first interest rate hike in the Eurozone by 25 basis points to then 0.25% in July.

On the other hand, inflation dampened consumer sentiment and affected consumer confidence as well as purchasing managers' sentiment. The ISM index for the manufacturing sector in the USA fell by 3.1 points to 53. While still indicating expanding economic activity, the index pointed to a slowdown in momentum. US companies were primarily looking at a weakening global economy.

In Germany, too, companies were more pessimistic about the future in June, especially in the manufacturing sector. Here, further increases in energy prices and the threat of a gas shortage were major concerns for companies. Accordingly, the ifo business climate index fell to 92.3 points in June (May: 93). This is also likely to have an impact on the beginning reporting season for the second quarter. Market participants expect only very cautious profit and sales forecasts for the coming quarters for the majority of companies on both sides of the Atlantic, which puts a damper on investors' mood. The flip side of this coin: If the global economy slows down, this could fight inflation more effectively than the planned withdrawal of liquidity by central banks.

The stock markets in China and Hong Kong experienced a clearly better June. As the Chinese government eased its strict zero-covid regime for Greater Shanghai and other regions, exports surged. The Purchasing Managers' Index for the manufacturing sector also rose, as in the previous month, reaching a level of 51.7 points, which again signals an expanding economy. This could manifest the recovery of the Chinese economy, which would also be good news for the local economy in view of easing supply chains.

The bond markets reacted to monetary policy and the continuing tense geopolitical situation and experienced a very volatile month: The yield on 10-year German government bonds rose from 1.12% to 1.76% in the meantime, but then only increased by 22 basis points to 1.34% over the month. The development of 10-year US Treasuries was similarly volatile. For the month, their yield rose by 17 basis points to 3.01%. The gold price came under pressure in the face of the appreciating US dollar and rising bond yields. The price for a troy ounce fell from 1,837.35 to 1,819.25 US dollars.

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