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Local and global markets in June

| Market Insights

The grass isn’t always greener on the other side, and investment decisions are tough to make throughout the world’s economies. The American markets strained anxiously under the revived discussions on protectionist action and talks to upscale trading tariffs for US aluminium and steel imports. Neighbouring countries were targeted, and Canada and Mexico responded in turn, with Canada issuing retaliatory trading tariffs and Mexico threatening to increase trading tariffs on farming produce. China, the EU and UK might also face protectionist action in the months to come, according to Trump, reducing investor confidence in global markets even further.

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 over the last year. 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.

South African trustees and investors breathed a sigh of relief as the local markets took an upturn, despite SA experiencing an outflow from bond and property investments. The listed property sector remained under severe strain 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.

The ALSI has returned -1.7% this year to date, and the ALBI returned 4.0% and cash 3.54% respectively. Internationally, the MSCI World Index rewarded offshore investors with year to date figures of 0.43% but declined in the MSCI Emerging Markets Index ($) with 6.64%. However, the weakened rand from the first six months of 2018 could have improved South Africans’ offshore investments.

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