Market Pulse - July 2024
- Monthly Market Pulse
- 09.08.24
Key themes
- Global stock markets rallied in July as some weakness in the technology sector was more than offset by softer inflation data in the US, which supported the case for some monetary easing and bolstered equity-market sentiment. Government bond prices were higher as investors priced in further rate cuts in 2024.
- Global economic data was mixed, with some signs of slowing in the US, while Eurozone output showed improving trends. Inflation slowed in the US, leaving the potential for the Fed to cut rates in the coming months, and Fed Chair Powell indicated as much at the central bank’s July policy meeting.
- Meanwhile, political risk remained in focus in Europe, with elections in the UK and France. In the US, politics took a dramatic turn as there was an assassination attempt on Donald Trump, and President Joe Biden withdrew from the presidential race.
Markets snapshot
- The MSCI All Country World index rose by 1.2% (0.7% in euros) over the month, with a supportive backdrop of potential rate cuts from major central banks in the coming months.
- The MSCI USA rose by 1.3% (0.3% in euros) as softer US inflation data and expectations for a rate cut from the Fed in September supported a rebound in technology stocks and the broader equity market into month-end.
- European ex-UK equities were up by 0.6% (in local and euro terms).
- The MSCI World Small Cap index rose by 6.0% (5.8% in euros) in July as small cap equities were supported by lower bond yields given their higher leverage levels and larger share of variable rate borrowings.
- Eurozone government bond prices were higher in July as investors priced in further rate cuts in 2024. The ICE BofA 5+ Year Euro Government bond index returned 3.0% amid falling yields, with the 10-year German bund yield down by 20bps to 30% in July. The equivalent US Treasury bond yield fell by 37bps to 4.03% over the month.
- Corporate bonds were supported by falling yields. European investment grade (IG) corporate bonds returned 1.7% as yields fell by 31bps to 3.56%. Spreads narrowed by 8bps to 109bps. Global high yield bonds returned 1.8% as yields declined by 31bps to 6.62%.