Global markets gained ground in June amid easing trade tensions and robust economic indicators. The month was marked by heightened geopolitical risk as Israel conducted airstrikes on Iran’s nuclear and military installations, triggering Iranian retaliation. This military escalation sent Brent crude oil prices surging by 7.0% on 13 June as investors grew concerned about a potential regional conflict impacting supply. Oil prices subsequently retreated after a US-brokered ceasefire was announced twelve days later.
Regional equity markets posted broad gains, led by the US (3.5%), with Europe (0.6%) and UK (0.5%) rising more modestly. Emerging markets (3.0%) and China (2.3%) also saw strong performance over the month, fuelled by optimism surrounding Asian technology and continuing de-escalation in US-China trade tensions.
Macroeconomic indicators maintained broad strength throughout the month, with June’s flash PMIs signalling expansion across resilient US and European markets. Inflation concerns over tariffs have yet to materialize, as US inflation registered at 2.4% in May, below market expectations. The Federal Reserve responded by keeping interest rates steady for the fourth consecutive meeting in June, adopting a data-driven approach to assess the economic impact of President Trump’s tariff policies. In the UK, the Bank of England held rates at 4.25%, citing persistent wage growth pressures on inflation. The European Central Bank reduced its policy rate to 2.0% with a 25bps cut at its June meeting, as the Eurozone economy posted 0.6% growth in the first quarter of the year.
The overweight position in Carnival (+19.2%) was the top contributor to excess returns in the Trust. The cruise operator raised its annual profit forecast despite broader economic uncertainties. The underweight position in Tesla (-9.8%) was also a positive contributor. Proposed legislation that was working through the US Congress during June planned to eliminate electric vehicle purchase credits, threatening to reduce Tesla’s profits. The overweight position in Mastercard (-5.6%) detracted from our performance. Mastercard shares declined following the US Senate’s passage of a stablecoin bill, reflecting investor concerns that stablecoin adoption could enable merchants to circumvent traditional credit-card processing fees.
We ended the month at a discount of 8.8%, widening from 8.5% in May. Net gearing continued to be conservative at 5.2% (with debt at fair value) for month-end.
