Equities posted solid returns in July, driven by broadening of the equity rally out of US/Tech/AI into more unloved parts of the markets, aiding all major equity regions delivering positive returns. Hopes of disinflation and a soft landing in the US took hold, even as growth weakness in Europe and China continued. Risk on sentiment extended into the summer with most asset classes finishing July in positive territory. Credit rallied too but Treasuries were mixed in the US and Europe, with short end prices moving higher on disinflation and peak rates narrative. But long end declined mildly owing to resilient economy and potentially higher for longer rates regime. Lower CPI meant weaker dollar which was among the worst performing assets of the month.
Equities rallied almost everywhere last month, as more bears turned into bulls with Developed marekts only slightly outperforming Emerging marekts. While Tech/AI remained in focus, the bid improved for wider equity complex with incoming data looking resilient (mainly in the US). Consequently, more cyclically tilted Europe managed to outperform the US. Within the US, Nasdaq and S&P 500 were broadly in line while the more old economy linked DJIA outperformed. Within Europe, core indices lagged periphery. In this environment, the pro-cyclical Austrian equity market delivered a strong positive performance in July with cyclicals, banks and Real estate leading the way. The strongest performers in July have been CA Immobilien, Immofiananz, Erste Group, Wienerberger und EVN, while Andritz, Voestalpine and DO & CO being the worst performers.
Sector leadership was unsurprisingly pro-cyclical last month with ytd laggards in Value sectors like Energy, Materials and Financials doing well. Support for oil and commodity prices from OPEC cuts and China policy support helped Energy and Materials, respectively, while decent results, improved positioning and rotation into laggards helped Financials. Well-owned Growth-tilted Cyclicals like Tech, Industrials and Consumer Discretionary lagged with Q2 results looking mixed for the space. Among Defensives, Communication Services outperformed, but rest of the cohort (Healthcare, Staples and Utilities) lagged.
With more than 70% of the Q2 reporting done in Europe, EPS growth y/y is ahead of expectations at -6% in Europe and -7% in US. Growth is much better and positive excluding the Energy sector in both regions, at 5% and 2% respectively. EPS beats % have improved as the season progressed in Europe and is now trending above average as has been the case in US. Cyclicals continue to lag Defensives while Financials have delivered strongly in Europe. Overall, margins have been more resilient than expected by analysts. Guidance and demand outlook from firms have been subdued but EPS momentum remains positive for now. With the bulk of the reporting done now, the equity market focus has shifted once again to the rates outlook.
Autor:
Andreas Wosol
Member of the board of ÖVFA
Amundi Austria GmbH, Head of Value
7 August 2023
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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.