In July 2022, the global equity and bond performances - as measured by the MSCI All Country World and the Bloomberg Global-Aggregate Total Return Index, are the best since 2020 with 6.86% and 2.13% respectively. In early July, the volatility spread between bonds and equity hit a high at 128 for the 1st time since 2009.
Central banks made against inflation kept going. The ECB rose its rate by 50bps for the 1st time in 11 years. It revealed the high level details of the anti-fragmentation tool – the TPI – to prevent South European economies from borrowing at higher levels. Italy’s prime minister Mario Draghi resigned. This fueled a sell-off in Italian debt and the spread between Italian and German benchmark rose to 2.31%. The TPI may be activated once the spread reaches the 250bps threshold. The Fed rose its rate by 75bps to fight inflation by curbing demand. It is open to soften its policy according to data. The 0.9% contraction in Q2 GDP - after a 1.6% drop in Q1 - increases the odds of a recession by year end.
Moscow started to progressively cut flows through the Nord Stream pipeline to Germany. Russia may be using gas as part of its war strategy. Natural Gas prices rose by 51.75% in July. On the other hand, Oil declined by to 6.75% to $98.62.
Equity Indices: NDX: +12.55%, MSCI WORLD: +7.86%, SX5E: +7.33%, SPX: +9.11%, STOXX 600: +7.64%,
Bonds: German 10Y yield: -51.9bps, US10Y Yield: -36.4bps
Commodities: Gold: -2.29%, Oil: -6.75%, Natural Gas: +51.75%
FX: DXY: +1.16%, USDJPY: -1.81%
From a regional perspective, European equities as well as US and International DM indices were sold. On the fixed income side, US and EU Govies were in demand.