Quarter in Review - Q2 2020

The MSCI AC World equity index rose 4.3% (2.8% in euro terms).

Japan rose 6.7% (4.3% in euro terms), as restrictions were eased earlier than expected and a larger-than-anticipated supplementary fiscal package was announced.

The US rose 5.2% (3.6% in euro terms) as the economy reopened and the Federal Reserve and Congress indicated that recent stimulus would be maintained (and increased) if necessary.

The Pacific Basin fell -1.2% (-1.9% in euro terms) as Hong Kong was negatively affected by the threat of increased restrictions from China via a new national security law resulting in the potential removal of preferential concessions for Hong Kong by the US.

Emerging markets also lagged, rising 0.7% (-0.8% in euro terms), as there were large outbreaks of Covid-19 across several emerging-market countries.

Eurozone >5-year bonds rose 0.4%, despite German 10-year yields rising to -0.45%.

Peripheral spreads narrowed on the back of the proposed EU recovery fund, which includes grants for peripheral European countries.

Italian 10-year spreads against Germany fell to 192 basis points (bps), while Spanish 10-year spreads narrowed to 101bps.

The euro rose in response to the proposed recovery fund; this eased fears of the re-emergence of the sovereign debt crisis with EUR/USD rising to 1.1101.

Commodities rose 16.4% (14.6% in euro terms), with oil surging 88.4% after its collapse in recent months.

A decline in global oil inventories, a reduced rig count in the US, suggestions of an extension of (or additional) production cuts from OPEC during the summer, and an expected improvement in demand all contributed to the rise in the oil price.



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