In June markets saw a continuation of the sell-off that was triggered by comments made by Federal Reserve Chairman Ben Bernanke in May in regard to the potential slowing of the pace of the Fed’s asset purchase program. Both equity and bond markets were sold off as the yield on the US 10 Year Treasury crept higher over the course of the month. The June Federal Open Market Committee (FOMC) meeting fuelled investor anxiety further as the Fed reiterated that the pace of asset purchases may be “moderated” later in the year. The combination of concerns about the timing of QE tapering, an unexpected spike in China’s short term interbank lending rate (SHIBOR) and ongoing uncertainty about future Chinese economic growth resulted in a particularly severe sell-off in emerging market equities and currencies. The Shanghai Composite index finished the month 14% lower while the ASX 300 Accumulation Resource Index, also closely tied to Chinese growth prospects, was down 10.1%.
