June 2024 - Political uncertainty

6 mins

Stock markets and the economy

Publié le 02/07/2024 Mis à jour le 04/07/2024

The global stock markets posted mixed results in June. The indexes in the United States, Asia and emerging markets advanced as major tech companies continued to be propelled upward by enthusiasm over artificial intelligence (AI). In contrast, the other sectors generally remained under pressure in the face of economic uncertainty, especially in Canada. European equities had a challenging, volatile month as political risks intensified. The European Parliament election increased the unpredictability, as did the dissolution of France’s National Assembly by President Emmanuel Macron and his calling of a snap election with a highly uncertain outcome.

As for monetary policy, the Bank of Canada and the European Central Bank have begun lowering their interest rates, raising hopes that the U.S. Federal Reserve will soon follow in their footsteps.

	Closing 30-06-24	Variation vs 31-05-24	Variation vs 31-12-23
Interest rate in Canada (%)
Key rate
Key rate	4.75	-0.25	-0.25
Commodities ($US)
Oil (WTI)
Oil (WTI)	$81.54	5.9% ▲	13.8% ▲
Gold
Gold	$2 326.75	0.0% ▲	12.8% ▲
Currencies
EUR/CAD
EUR/CAD	1.47	-1.0% ▼	0.2% ▲
JPY/CAD
JPY/CAD	0.01	-1.9% ▼	-9.3% ▼
USD/CAD
USD/CAD	1.37	0.4% ▲	3.4% ▲

Sources: Bank of Canada, Bloomberg Finance L.P.

CANADIAN MARKET

-1.4% (S&P/TSX Composite 30-06-2024)

The Canadian market showed signs of weakness in June. The S&P/TSX Composite Index ended the month with a -1.4% return, mainly because lower commodity prices caused the energy and materials sectors to lose ground. Financials also detracted from the return, as the slowing economy and deteriorating credit quality prompted Canadian banks to increase their loan-loss provisions, namely the cash reserves they set aside to cover loans if borrowers cannot service their debt.

In contrast, the Canadian bond market welcomed the Bank of Canada’s decision to cut interest rates in order to support the economy amid moderate inflation and weaker growth indicators. The FTSE Canada Universe Bond Index returned 1.1% on the month.

AMERICAN MARKET

4.0% (S&P 500 30-06-2024 in CAD)

In the United States, the information technology sector lifted the market to yet another record. The S&P 500 Index hit its 30th all-time high this year and posted a monthly return of 3.6% in U.S. dollars in June. The gain was 4.0% in Canadian dollars. Despite signs of a slowdown in the U.S. economy and labour market, investors were still optimistic that the Fed would cut interest rates by year-end. Data released at the end of the month showed that inflation was moderating in the United States and reinforced that sentiment.

EUROPEAN MARKET

-1.9% (MSCI Europe 30-06-2024 in CAD)

The European markets were highly volatile, mainly because of the results of the European Parliament election and political instability in France, as already noted. Moreover, the European Central Bank revised its inflation and growth forecasts upward, creating uncertainty about its next move, despite an initial rate cut in June. In this context, the MSCI Europe Index ended the month with a return of -1.4% in local currencies and -1.9% in Canadian dollars. All sectors were down except information technology and health care.

ASIAN MARKET

2.8% (MSCI AC Asia-Pacific 30-06-2024 in CAD)

The benchmark MSCI All Country Asia Pacific Index returned 3.1% in local currencies and 2.8% in Canadian dollars. The Asian markets advanced on the strength of Taiwanese and South Korean tech stocks, which also benefited from enthusiasm over AI. In contrast, Japan detracted the most from the return because of rising inflation and uncertainty about the direction of the country’s monetary policy.

EMERGING MARKETS

4.4% (MSCI Emerging Markets 30-06-2024 in CAD)

Emerging markets outperformed developed markets in June, buoyed by strong performances by the Taiwanese and South Korean markets. The MSCI Emerging Markets Index returned 4.3% in local currencies and 4.4% in Canadian dollars. India also contributed positively with its solid growth prospects. In contrast, Mexico’s presidential election created turbulence, causing a sharp downturn on the local stock market.

Read other articles

About the stock markets and the economy.

Read other articles

Sources: Bank of Canada, FTSE International Limited, S&P Dow Jones Indices LLC and MSCI Inc.

This review has been prepared for the general information of our clients and does not constitute an offer or solicitation to buy or sell any securities, products or services and should not be construed as specific investment advice. All opinions and estimates expressed in this document are as of the time of its publication and are subject to change. The information contained in this document has been obtained from sources believed to be reliable, but we do not represent that it is accurate or complete and it should not be relied upon as such. The content of this presentation is proprietary and should not be further distributed without prior consent of Gestion FÉRIQUE.

The S&P/TSX Composite Index and S&P 500 Index (“Index(es)”) and associated data are a product of S&P Dow Jones Indices LLC, its affiliates and/or their licensors and has been licensed for use by Gestion FÉRIQUE. © 2023 S&P Dow Jones Indices LLC, its affiliates and/or their licensors. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit www.spdji.com. S&P® is a registered trademark of Standard & Poor’s Financial Services LLC (“SPFS”) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). Neither S&P Dow Jones Indices LLC, SPFS, Dow Jones, their affiliates nor their licensors (“S&P DJI”) make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and S&P DJI shall have no liability for any errors, omissions, or interruptions of any index or the data included therein.

FTSE Global Debt Capital Markets Inc (FTSE GDCM), FTSE International Limited (FTSE) and the London Stock Exchange Group companies (the Exchange, together with FTSE GDCM, FTSE and the Exchange, the “Licensor Parties”). The Licensor Parties make no warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE Canada Universe Bond Index (the Index) and/or the figure at which the said Index stands at any particular time on any particular day or otherwise. The Index is compiled and calculated by FTSE GDCM and all copyright in the Index values and constituent lists vests in FTSE GDCM. The Licensor Parties shall not be liable (whether in negligence or otherwise) to any error in the Index and the Licensor Parties shall not be under any obligation to advise any person of any error therein. FTSE® is a trademark of the FTSE International Limited and is used by FTSE GDCM under licence.

MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.