Today is the last trading day of June, which also marks the end of 1H19 for equities. Major markets including the US, Japan, Europe, China and HK have registered decent gain year-to-date, varying from 8.8% to 27.1%.
A global cyclical slowdown, a US-China trade war and a drastic swing of central bank policy towards easing were among the major events surrounding the stock markets this year. Trade conflicts and forward-backward move in the talks between US and China led to tremendous uncertainties and market volatility.
Manufacturing readings are deteriorating across Asia, Europe and is finally starting to surface in the US as well, due to a cyclical downturn and escalating trade tariffs across the globe. Further economic weakness is likely down the road.
Monetary policy has turned dovish, which fuelled the rally of equities in spite of a weaker economic outlook. US 10-year treasury yield has tumbled to just above 2%, suggesting the low interest rate era is back again. Too little growth, yet too much money out there. Ample liquidity drives up equity prices in a low growth environment, which seems to be unsustainable in the long run.
Nonetheless, let’s look back at the G20 meeting in Osaka for the weekend. Markets seemed to be composed ahead of the meeting between Trump and Xi, who will likely set the path for a new round of trade negotiations and work around key deadlock issues like structural reform and technologies.
The fact that some US chip makers have resumed shipping to China’s telecommunication equipment giant Huawei, is showing signs of easing of the US ban on China. Markets are anticipating some more constructive moves and a trade truce to be announced during the G20.
Singapore market had a decent rebound this week, despite analysts’ warnings that Singapore is heading for a recession next quarter. Banks, telcos and consumer staples continued to outperform while the real estate sector suffered from profit-taking following the Fed’s mixed signal on July interest rate cut outlook.
YTD performance of major indices
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