Market Pulse - July 2021

Key themes

Fed not yet ready to ‘taper’ asset purchases

Delta variant blunted by vaccinations

Companies report strong results

Brexit issues resurface

Markets snapshot

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.

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