Wall Street clinched its best first half of a year in more than two decades, as hopes held for a positive outcome for trade relations at the looming meeting between presidents Donald Trump and Xi Jinping.
The S&P 500 was up 0.6 per cent on Friday, building on a 0.4 per cent advance from the previous session and securing a 6.9 per cent rise for the month — its best June since 1955. The S&P has now advanced 17.3 per cent since the start of the year. That is the benchmark’s strongest first-half performance since 1997.
Aside from trade talk hopes, sentiment was also supported by another soft inflation reading. The Federal Reserve’s preferred measure of inflation — the core personal consumption expenditures index — met expectations exactly, rising 1.6 per cent from the prior year period. Traders believe the lack of price pressure would make it easier for the central bank to cut interest rates if signs of weak growth continue.
Financials were the top performing sector on the S&P 500, rising 1.4 per cent as bets grow that the Fed will cut rates as soon as next month.
Across the Atlantic, investors backed technology stocks in Europe as they kept close watch on newsflow relating to the talks, which are expected to take place on the sidelines of the G20 summit in Osaka. The Stoxx index tracking the sector, which faces disruption from any deepening tariff battle between China and the US, rose 1.5 per cent as the improvement in sentiment held. That outperformed a 0.7 per cent advance for the wider Stoxx 600.
Frankfurt’s Xetra Dax 30 gained 1 per cent, with major exporters prominent on its leaderboard, including Adidas, the sports goods maker, which rose 2.2 per cent. Continental, the tyre company, added 1.4 per cent.
London’s FTSE 100 gained 0.3 per cent, led by a near-4 per cent rally for Burberry, the luxury fashion brand that also generates significant revenue in China.
Gold — seen as a haven in times of uncertainty and on course for its strongest monthly rally in three years for June — was up 0.1 per cent at $1,410.11 an ounce. Japan’s yen was slightly weaker at ¥107.80 to the dollar.
The yield on 10-year US Treasuries continues to hover around the 2 per cent mark after having fallen through the level last week. The yield was less than 1 basis point higher at 2.0068 per cent and underscored investors’ sense of cautious following the dovish pivot by a number of major central banks in recent weeks.
Mark Dowding, chief investment officer at BlueBay Asset Management, predicted the US would exhibit “a desire to try to work towards” a trade deal,” but added:
“[With] the Federal Reserve appearing increasingly compliant to Mr Trump’s wishes to deliver more dovish monetary policy, and with the US economy performing relatively well and the S&P close to its highs, we would note that the US administration currently seems under relatively little pressure.
“Similarly, we sense that Beijing won’t want to be seen bowing to US pressure and so it may be that a stalemate is reached where further tariffs are placed on hold, but where trade discussions drag on over the summer.”
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