A tentatively positive start to the session in Europe turned negative within the first hour of the session, reflecting continued uncertainty about lots of things, not least a degree of caution on the last day of the quarter; whilst over the pond US markets ground out fresh record highs as big tech holds the show on the road. Asian shares rose and global stocks were close to record highs, whilst US futures were indicating another higher open. You get the impression that markets want to get the quarter-end out of the way before we see some real movement, but the bias remains mainly positive. 

The FTSE 100 is heading into the final day of trading for the quarter +5.4%, and up 9.5% for the year so far, and is just about holding gains for the month of June despite a soft week. The FTSE 100 still has a long way to go before it recaptures its pre-pandemic highs but should have more room to run. With a dividend yield of +3% vs 2.3% on German blue chips and less than 2% for the US equivalents, and PE of 17 vs 19 on the DAX and 28 on the SPX, it offers considerable value still. 

The S&P 500 is up 8% this quarter and 2% higher this week, riding a +14% gain YTD, figures matched closely by the DAX. Within these stats we note that the mega cap growth up 6% this month. The Russell 1000 growth index is +2% in June, while its value counterpart is –2%. YTD growth is +16%, value +17%.  For the US at least the continued rotation in and out of growth/value has done nothing but see both rise – when one takes a breather the other steps up as bond markets, tamed by central banks, have remained calm during a period of strong global growth. The question as we head into H2 is whether there is more room to run for the bull market or whether we are due a correction. I tend for the latter to play out in the coming months as bonds are sure to move.

US consumer confidence rose for the fifth month in a row to hit a fresh post-pandemic high. The Conference Board’s consumer confidence index hit 127.3 in June from 120 in May, with respondents offering a healthy outlook for business, labour markets and income. Inflation expectations rose but consumers didn’t fear this would have much impact on them. That seemed to give investors confidence that the US economy is still on track. 

Eurozone inflation numbers for May due later this morning will be closely watched for a read on the path of ECB policy direction. Inflation jumped to 1.9% in May from 1.2% in April, an unexpectedly high print, whilst core inflation rose to 1.3%. The ECB’s Villeroy says inflation will go up this year but down again in 2022 and 2023 (transitory). The Fed’s Barkin said “we’ve got a long way to go on the job front” before slowing asset purchases, whilst Waller said he would not rule out a hike in 2022, though this was heavily caveated: The unemployment rate would have to drop fairly substantially, or inflation would have to really continue at a very high rate, before we would take seriously a rate hike in 2022, but I’m not ruling it out.” 

WTI trades around the $73 level ahead of the OPEC meeting and between two US inventory reports. Yesterday, OPEC’s Barkindo warned that significant uncertainty in oil markets calls for prudence, highlighting the considerable risk to demand outlook from Covid variants. OPEC and allies are due to meet tomorrow to set out production for August amid an increasingly tight market. Meanwhile API data showed a draw of 8.2m barrels for the week ended June 24th, the sixth straight weekly decline. Gas inventories rose 1.3m barrels, whilst distillates rose by 400k. Official EIA figures due later today are expected to show a draw of 4.7m barrels. 

Gold broke down and out of the tight range it has traded of late, before trying to recover the $1,760 support. Failure to do so could see retest of the $1,675.