Global equities had the worst first half year on record, but rebounded strongly in July with the best monthly return in twenty months. The USA and Tech sectors led performance after a better than-expected US earnings season. In addition, expectations that the US FED might be less aggressive in coming months - after raising rates by 75bps in July - also helped. Concerns about growth slowing and some signs that inflation might be peaking meant that investors began to price in a less aggressive pace of monetary tightening from the Fed over the coming months. One reason that markets have started to reprice inflation expectations is the pullback in commodity prices. The prospect of slower global growth and an impending recession in both Europe and the US impacted oil prices with Brent crude futures dropping -4.2% and WTI futures trading off -6.8%. The pullback in commodities such as copper (-3.8%), wheat (-7.0%), and iron (-5.8%) also are projected to reduce pricing pressures. Falling growth coupled with an anticipated Fed inflection point has seen yields come down from June highs, providing some relief to the market-cap heavy richly valued parts of the market, like long duration Tech/Growth/Quality, but also the under owned Cyclicals.
Also European stocks posted their biggest monthly gain since November 2020 in July. Since the outbreak of the war in Ukraine, capital markets have been dominated by a flurry of headwinds, including hawkish central banks, increasing inflation, weaker economic growth momentum and constrained gas supplies. The equity market rebound in July in Europe was driven by technology and the cyclical sectors in the markets such as Industrials and Consumer Discretionary. At the ECB meeting mid-month, the central bank began their hiking cycle with a 50bp hike.
In this environment, the pro-cyclical Austrian equity market delivered a strong positive performance in July with cyclicals and banks driving leading the way. The strongest performers in July have been Andritz (+18,5%), Verbund (+15,2%), voestalpine (14,72%), EVN (13,86%) und RBI (+13,83%), while OMV (-7,46%), Mayr-Melnhof (-3,83%) and AT&S (-3,06%) being the worst performers.
Autor:
Andreas Wosol
Member of the board of ÖVFA
Amundi Austria GmbH, Head of Value
3 August 2022
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Note
Wiener Börse AG would explicitly like to point out that the data and calculations given in this report are historic values, which do not permit any conclusions as regards future developments or value stability. Price fluctuations and loss of capital are possible in securities trading. The contribution is the personal opinion of the analyst and does not constitute a financial analysis or a recommendation for investment by the exchange operating company, Wiener Börse AG.