Fed not yet ready to ‘taper’ asset purchases
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The MSCI AC World equity index rose 0.7% (0.7% in euro terms).
The US rose 2.4% (2.4% in euro terms) due to a strong second-quarter earnings reporting season and suggestions from the Federal Reserve that asset purchases might not be scaled back until the first quarter of 2022.
European equities rose 1.8% (2.1% in euro terms), due to dovish interest rate guidance from the European Central Bank (ECB).
Emerging markets fell -6.0% (-6.7% in euro terms), impacted by more stringent regulations in the Chinese technology sector. Japan fell -2.4% (-1.3% in euro terms) as Covid-19 case numbers rose and new restrictions were implemented.
Eurozone >5-year bonds rose 2.7% in July.
The German 10-year yield fell to -0.46% as the ECB indicated that interest rates will not be raised for several years and that asset purchases will continue.
Peripheral spreads drifted higher, with Italian and Spanish 10-year spreads rising to 108 basis point (bps) and 73bps, respectively.
The euro rose slightly to 1.1870 against the US dollar.
Commodities rose 1.6% (1.6% in euro terms) with West Texas Intermediate (WTI) oil rising 0.7%. Commodities were supported by positive demand as global growth continued to recover from last year’s recession.
Meanwhile, oil was supported by the OPEC+ announcement that supplies will continue to be managed until September 2022.
Gold rose 2.4%, as US real yields fell to new lows.