In contrast with the volatility of previous months, June was universally negative with very few sectors outperforming. Again the resources stocks tended to outperform while financials and those more exposed to the consumer underperformed. Investor sentiment turned increasingly negative as soaring commodity prices, rising bond yields, and negative central bank commentary all served to spook investors. Given the increased risk aversion, investors again sought solace in larger capitalisation stocks with small and mid-caps underperforming.
At the individual stock level there was little fundamental reason for the majority of the moves. A number of stocks, such as Invensys and CRH suffered as investors became concerned over the cyclicality of their profits. Another major disappointment was Innovation Group which continued to drift post last months update. Other negative contributors included Bouygues, SocGen and Modern Times Group. Positive performances came from Valiant Petroleum, Amec, Elementis and Tullow Oil.
Trading activity included new positions in ASM International, Novo Nordisk, Lonmin and Xstrata. Holdings in Sonae, Fiat, Norkom and Brisa were exited.
Support Services
As companies increasingly concentrate on their core competencies, demand for support services has risen. In particular, those supporting the oil industry have benefited from the upturn in the cost of crude oil and historical underinvestment in infrastructure. These companies are better equipped to carry out non-core activities for clients and have seen sales and margins rise sharply.