LGFA Financial Market Conditions

Global financial markets were relatively stable over the past month although recent trade tensions between the US and China re-emerged.

In mid-June the US Federal Reserve increased their reserve rate by 0.25% to range between 1.75-2%. The move was widely anticipated, however, markets were surprised by the Fed’s projection that it may need to raise rates more rapidly than previously expected. The US unemployment rate is currently at an 18 year low of 3.8% and is probably the main reason the Fed is considering accelerating its tightening timeline. Trade tension between the US and China re-emerged over the past month with various tariffs on assorted materials and goods now taking effect. The issue has now moved away from just a US-China issue with Canada, Mexico and a number of European countries also enacting retaliatory tariffs on US material and goods. Bond yields around the globe continued to fall over the past month as concerns about the possibility of a prolonged trade war weighted on sentiment.  The US 10-year bond yield fell around 0.05% in June with other highly rated bond experiencing similar falls.

Australian financial markets were also relatively stable over the past month. Recent housing price data from CoreLogic showed that Sydney housing prices fell 4.5% over the year to June with Melbourne prices rising by 1% over the same time period. The Australian unemployment rate fell to 5.4% (from 5.6%) in May, its lowest level since November 2017, but was not seen as a promising result by markets who were more focused on labour market underutilisation and lack of wage growth within the economy. The Australian dollar fell almost $0.02 USD over the past month and is currently trading at around $0.74 USD.

CoreLogic Home Value Index: