South African markets delivered another mixed month in June, with bonds and listed property outperforming equities as the sharp correction in precious metal prices continued to weigh on the local bourse. The FTSE/JSE All Bond Index gained +1.5% MoM, while SA-listed property advanced +3.3% MoM. In contrast, the FTSE/JSE All Share Index declined -3.8% MoM, as weakness in resources more than offset resilient gains across financials and industrials. The FTSE/JSE Africa Resource 10 Index fell -16.4% MoM, with gold and platinum miners bearing the brunt of the sell-off as geopolitical risk premiums unwound and commodity prices retreated sharply. Financials (+2.6% MoM) and industrials (+1.9% MoM) proved more resilient, supported by continued strength in banks, retailers and other domestically focused sectors. In US dollar terms, MSCI South Africa declined -6.8% MoM, underperforming both MSCI World (-0.8% MoM) and MSCI Emerging Markets (-1.7% MoM), as lower commodity prices and a firmer US dollar weighed on investor sentiment.
South Africa's macroeconomic backdrop remained relatively resilient despite inflationary pressures continuing to build. Headline inflation accelerated to 4.5% YoY in May from 4.0% previously, reflecting the delayed pass-through of higher global energy prices, while core inflation rose to 3.8% YoY. Encouragingly, first-quarter GDP growth surprised to the upside, expanding by 0.5% QoQ, supported by stronger activity across the trade, construction and financial sectors. Despite the firmer inflation backdrop, local bond markets remained well supported, with the 10-year government bond yield declining by around 10 basis points to 8.3%, reflecting confidence in South Africa's fiscal framework, attractive real yields and improving economic momentum. The rand weakened modestly by 1.0% MoM against the US dollar, largely reflecting softer commodity prices and renewed US dollar strength.
Global equity markets paused in June following an exceptionally strong second quarter, with both developed and emerging market equities posting modest declines as investors balanced resilient corporate earnings against persistent inflation concerns, evolving AI valuations and ongoing geopolitical uncertainty. While headline index returns were subdued, market leadership continued to evolve beneath the surface as capital increasingly flowed towards companies supplying the infrastructure underpinning the AI investment cycle, rather than those expected to benefit from AI adoption further downstream. Meanwhile, commodity markets moved sharply lower as tensions in the Middle East eased following the US-Iran memorandum aimed at reopening the Strait of Hormuz. Brent crude oil fell -20.8% MoM, while gold (-11.7% MoM) and platinum (-19.2% MoM) extended their recent declines as safe-haven demand faded and investors became more confident that the Federal Reserve would remain committed to containing inflation.
US equity markets delivered mixed returns in June as investors became increasingly selective within the technology sector. The S&P 500 declined -1.1% MoM, while the Nasdaq 100 was broadly unchanged (-0.2% MoM), masking significant divergence beneath the surface. In contrast, the Dow Jones Industrial Average gained +2.5% MoM, reflecting continued rotation into more cyclical, industrial and value-oriented sectors. Within technology, investors rotated away from richly valued software companies and several mega-cap AI beneficiaries, while semiconductor and memory-chip manufacturers continued to outperform as demand for AI infrastructure remained robust. As the AI investment cycle matured, markets became increasingly discerning, favouring companies supplying the infrastructure underpinning the AI build-out over those expected to monetise the technology further downstream. On the policy front, headline inflation accelerated to 4.2% YoY, while the Federal Reserve kept interest rates unchanged at its June meeting. At his first meeting as Chair, Kevin Warsh maintained a hawkish tone, signalling that policymakers remain prepared to tighten monetary policy further should inflation prove more persistent than expected. Higher Treasury yields and a firmer US dollar also weighed on investor sentiment during the month.
European equity markets proved relatively resilient in June, outperforming the US despite heightened geopolitical uncertainty and continued inflation pressures. The MSCI Europe ex-UK Index rose +3.4% MoM, supported by financials and industrials, while France's CAC advanced +2.7% MoM. In contrast, Germany's DAX was marginally weaker, declining -0.4% MoM. Encouragingly, eurozone headline inflation eased to 2.8% YoY, reinforcing expectations that underlying price pressures continue to moderate despite lingering uncertainty around energy markets. In the UK, the FTSE 100 gained +0.8% MoM despite renewed political uncertainty following Prime Minister Keir Starmer's resignation. UK inflation remained unchanged at 2.8% YoY, supporting expectations that the Bank of England will maintain a cautious approach to monetary policy.
Emerging market equities experienced a modest pullback in June after an exceptionally strong second quarter, with the MSCI Emerging Markets Index declining -1.7% MoM. Performance diverged meaningfully across the region. Mainland Chinese equities proved relatively resilient, with the Shanghai Composite rising +0.6% MoM as manufacturing activity remained in expansionary territory. In contrast, Hong Kong's Hang Seng Index fell -9.1% MoM as Chinese technology shares came under pressure amid the broader rotation away from internet and software companies. Despite the monthly weakness, the broader AI investment cycle continued to provide a powerful tailwind for emerging markets. Demand for semiconductors, memory chips and electrical equipment remained exceptionally strong, supporting technology-heavy markets such as South Korea and Taiwan, while China's official manufacturing PMI improved to 50.3, signalling that underlying economic activity continued to stabilise despite softer investor sentiment.
The hedge fund ended the month in negative territory, as losses from the long book outweighed gains generated by the short book. Performance on the long side was weighed down primarily by positions in PGM producers (Northam Platinum and Impala Platinum) and Barrick Mining, reflecting the broad weakness across precious and industrial metals during the month. These losses were partially offset by a positive contribution from Bid Corporation following a resilient trading update. Within the short book, gains were generated from selected positions in the gold mining sector and index protection, while short positions in the telecommunications sector detracted from performance.