In July, financial markets again watched central bank and inflation data with great interest. Although the ECB raised policy rates further (to 3.75%), the market believes that the end of a period of interest rate hikes is slowly approaching. Indeed, leading indicators (these anticipate growth figures to be published later) are beginning to weaken in Europe. The results on the interest rate markets remained limited and the fall of the Dutch cabinet had little effect on the price of Dutch government bonds. Equities and commodities picked up somewhat, and on the currency market it was noticeable that the Russian ruble continued its recent decline.
Shares
In July, the MSCI All Countries World Index (measured in euros) thickened further by +2.6%. Unlike last month, emerging markets (+5.1%) fared much better than developed markets (+2.3%). Within developed markets, the spread was not very wide. Pacific excluding Japan (+3.3%) was the leader, followed by North America (+2.3%), Europe (2.0%) and Japan (+1.9%). Looking at the regions within emerging markets, China had a very strong month with a return of a whopping +9.0%. EMEA (+5.8%), Asia (+5.1%) and Latin America (+4.1%) followed at an appropriate distance. In July, energy and financials were the best-performing sectors and utilities lagged a bit again. ‘Value’ did slightly better than ‘growth’.
Bonds
Also in July, US interest rates rose slightly more than in Europe. The 10-year rate there approached the 4% mark (+0.12% to 3.96%). German 10-year rates rose 0.10% to 2.49%, slightly more than Dutch 10-year rates (+0.08% to 2.82%). Risk premiums declined further last month. Emerging market government bonds benefited the most (-0.34% to 3.98)%. The premium for less risky corporate bonds fell 0.14% to 1.47%. For more risky corporate bonds, the decline was -0.26% (to 4.23%).