August 2023 Flow Report
In August 2023:
1/US Bonds Yield Decline, 2/Concerns Over China, 3/Equity Performance YTD.
1/ US Bond Yields and the Jackson Hole conference. During the final week of August, the US 2Y yield declined by 21bps to 4.88bps after rising for 3 weeks in a row to climb above 5% for the 2nd time this year. On the other hand, the US 10Y yield declined by 7bps after being dragged higher for 6 weeks in a row. A revised reading for US GDP of 2.1% in Q2 was disclosed vs 2.4% est. At the Jackson hole conference, Powell mentioned that to come back to 2% inflation, the Fed will either have to hold rates higher for longer or raise them. Next FOMC meeting will take place on the 14th of September, with expectations that the rates will remain in the 5.25% to 5.50% range.
2/Concerns over China. Weak economic data pushed the PBOC to unexpectedly cut rates to support the economy. Investors’ confidence is deteriorating. The MSCI CHINA A lost all the advance gained in July and further declined by 7.20% in August to came back to level seen in November 2022.
3/Equity. Performances. Main indices were in negative territory in August with US equities outperforming peers. The Nasdaq and SP500 were down -1.38% and -1.51%, followed by European indices down by -3% approx. While Emerging equity were more strongly hit with MSCI EMERGING and MSCI CHINA A down by -6.02% and -7.20% respectively.
August Performance highlights (USD)
Equity Indices: MSCI CHINA A: -7.20%, MSCI EMERGING: -6.02%, SX5E: -3.75%, MSCI WORLD: -2.05%, SPX: -1.51%, NASDAQ: -1.38%
Bonds: GER 10Y: -9bps, US 10Y: +9bps, GER 2Y: -9bps, US 2Y: -4bps,
Commodities: Gold: -1.17%, Oil: +2.32%,
FX: DXY: +1.29%, USDJPY: +1.53%
From a regional perspective, US, International DM, Swiss and EM equities were bought, while Nordics, Europe and Germany were sold. On the fixed income side, strong appetite for European government bonds and US Treasuries.
On equity indices: The S&P500, NASDAQ, MSCI USA, FTSE ALL WORLD and MSCI SWITZERLAND were in demand. The MSCI EMERGING and MSCI JAPAN recorded a mixed activity.
On fixed income: The European EONIA and the EURO GOVT 30Y were bought while the GER 0-1Y was sold. On the US TREASURIES, mixed activity took place on the 1-3Y and 7-10Y while the 3-7Y were sold.*