As markets enter into the summer lull, it is useful to take a step back. The global economy is in better shape than it has been in several years. This has allowed other central banks to follow the Fed and gradually start their exit journey, a process that is a historic challenge given the unprecedented level of monetary accommodation. But with inflation still below target, a key part of the normalisation puzzle is still missing. Major equity market indices are at or close to record highs with the VIX (volatility index) very close to record low, anchored by the absence of volatility in debt market. Equity markets were recently supported by positive fundamental developments in the US and abroad, but are facing two near-term known risks: extremely low volatility and prospects of central banks’ balance sheet reduction.
The Stoxx 600 fell -0.3% in July (euro terms, total return), with a strong Euro starting to weigh on the index. The strong macro momentum faded a bit in Europe with the Euro area composite PMI new orders fading to 55.5 from 56.0 in June. Brent crude had a strong month, rising 12.0% in July, the largest monthly gain since December 2016. In local currency terms, Europe underperformed relative to global equities, which were up +1.5% in July.
The US was the best performing region, gaining +2.0% while Japan only increased by +0.3%. Within Europe (local currency terms), country performance was mixed with some major countries like Germany and France seeing declines while others like Italy and Switzerland performing well.
Among sectors, basic resources was the top performer. Cyclicals were weak with travel & leisure, chemicals and media all declining. Among financials, insurance and banks performed strongly. Defensives were mixed with telecoms and utilities up while healthcare and personal & household goods fell.
The Austrian equity market (ATX) could once again demonstrate its relative strength and delivered a strong performance of around 3,6%. This strong performance was driven by strong performance of Raiffeisen Bank International, OMV, Erste Group, Voestalpine, Uniqa, Telekom Austria and Schoeller Bleckmann.
Autor:
Andreas Wosol
Senior Portfolio Manager
European Equities & Country Strategies
Pioneer Investments Austria GmbH
A company of the Amundi group
Member of the Board of ÖVFA
3 August 2017
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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.