Monthly Markets Review – August 2022

A review of markets in August, when developed market shares fell as central banks reaffirmed their focus on inflation.

The month in summary:

Developed market equities resumed their declines in August as it became clear that further substantial interest rate rises may be needed to tame inflation. Emerging market shares posted a modest gain. Bond yields rose, meaning prices fell, with the UK underperforming other major markets.

Please note any past performance mentioned is not a guide to future performance and may not be repeated. The sectors, securities, regions and countries shown are for illustrative purposes only and are not to be considered a recommendation to buy or sell.


US

US equities declined in August after Federal Reserve (Fed) chair Jerome Powell said the US central bank would need to keep monetary policy tight “for some time” in a bid to tackle soaring inflation. This dashed market hopes that further interest rate rises would be more modest and led to sharp falls in share prices and volatile trading throughout the month. 

US Congress passed the Inflation Reduction Act which aims to reduce inflation by curbing the deficit, as well as investing in domestic sources of clean energy.

US inflation, as measured by the consumer price index (CPI), increased by 8.5% year-on-year in July, down from 9.1% in June. The US jobs market remains strong with non-farm payrolls growing by a larger-than-expected 528,000 in July.

By sector, information technology, healthcare and real estate experienced some of the sharpest declines. Energy stocks achieved a robust performance amid ongoing strong demand and a curtailment of supplies following Russia’s invasion of Ukraine.

Semiconductor stocks were particularly weak in August amid rising inventories of some types of chips, as well as some ongoing supply-chain issues. Consumer durables stocks also saw significant declines in the month as rising prices prompted consumers to cut back on household items.

Eurozone

Eurozone shares fell in August amid ongoing worries over inflation, particularly in the form of high gas and electricity prices. In the MSCI EMU index, energy was the only sector to post a positive return, while underperforming sectors included real estate, healthcare and information technology. Some pharmaceutical stocks were hit by worries over potential liabilities related to US litigation around heartburn drug Zantac.

The energy crisis across Europe intensified amid worries over supply and high costs. Russia said it would halt the Nord Stream 1 pipeline, which supplies natural gas to Germany, for three days from 31 August (as of early September, the pipeline has not reopened). Meanwhile, several of France’s nuclear reactors were offline for longer than expected after maintenance. Further upward pressure on power prices has come from this summer’s drought as low water levels on the Rhine have affected the delivery of coal to coal-fired power plants.

Inflation continued to rise in the eurozone with annual consumer price index (CPI) inflation estimated to be up 9.1% in August. Industrial producer prices for June were up 35.8% in the eurozone compared with June 2021. Minutes from the European Central Bank’s (ECB) July meeting indicated that policymakers remain concerned about inflation and that a further rise will come at the meeting in September.

UK

UK equities fell over the month. A number of large cap equities held up relatively well led by the energy and banking sectors, in line with the trend seen since the beginning of 2022. Major oil companies are anticipated to benefit from an ongoing inflationary/stagflationary economic environment, while banks are seen as a beneficiary of higher interest rates.

Consumer focused areas underperformed. This is amid fears that rising energy prices and interest rates will severely pressure the consumer, with UK households facing an income squeeze on multiple fronts in coming months. Fears around the outlook for the domestic economy more widely – and the country’s fiscal position – were also reflected in a very poor performance in sterling, although in the context of continuing strength in the dollar.

Political uncertainty weighed on sentiment. The resignation of UK prime minister (PM) Boris Johnson has put a block on further major policies being introduced until a new leader of the ruling Conservative Party is elected. As a result, questions remained over how any new PM might support consumers and businesses amid an intensifying energy crisis.

In addition to consumer exposed areas performing poorly, traditionally economically sensitive ones (due to growing fears around recessionary outcome in many developed economies), and those parts of the market offering high future growth potential (due to higher rates) also lagged. These factors combined drove a poor performance from UK small and mid cap equities over the period.

The Office for National Statistics estimated that the UK economy contracted by 0.6% in the month of June, after 0.4% growth in May. A dip was expected given the extra bank holiday to celebrate Her Majesty the Queen’s Platinum Jubilee. However, consensus expectations were too pessimistic, forecasting a contraction of -1.3%, which would have been more in-line with past Jubilees.

Japan

The Japanese stock market rose in the first half of August driven by strong quarterly results and an anticipated peak in US inflation. The yen resumed its weakening trend against the US dollar, after the brief reversal seen in the second half of July.

Investors were generally optimistic over some early signs, or hope, that US inflation may soon be approaching its peak. Conversely, but equally encouraging, are signs that Japanese inflation may be becoming entrenched at a moderate, but sustainable rate, after decades of deflation. Nationwide consumer price data released in August showed core inflation (excluding only fresh food) had edged up again to 2.4% in July.

The first estimate of GDP growth for the second quarter was also released. The quarter-on-quarter annualised rate of 2.2% was slightly lower than consensus expectations but the detailed breakdown was interpreted more positively with some resilience in consumption and capital expenditure. 

Aside from macro data, the main influence on individual stocks came from the results announcements for the March to June quarter, which were completed in August. Although profit momentum slowed from the previous quarter, overall results were again ahead of expectations and profit margins appear to have remained resilient so far, despite increasing cost pressures. With many companies having made conservative forecasts for this fiscal year, there is scope for upward revisions around the next quarterly results announcements.

Asia (ex Japan)

Asia ex Japan equities were weaker in August with declines in Hong Kong and South Korea offsetting gains in India and Indonesia. Hong Kong was the weakest market in the MSCI AC Asia ex Japan index in August amid losses among Chinese carmakers. Vehicle deliveries suffered from supply chain disruptions and weak consumer confidence, undermining the corporate earnings outlook. Shares in South Korea also ended the month in negative territory as concerns over the outlook for interest rates and fears over recessions in many of the major world economies weakened investor sentiment.

Singapore and Thailand both ended the month in negative territory. Shares in China were flat in August on concerns over rising interest rates, as countries around the world battle soaring inflation. The alarming spread of Covid-19 throughout China also weakened sentiment, prompting fears of further lockdowns as the country continues to pursue a policy of zero-Covid. Investor sentiment was also weakened after new data released during the month showed that factory activity continued to contract in the world’s second largest economy following strict Covid-19 lockdowns and a record heatwave during the summer.

Thailand, India and Indonesia all achieved modest gains and ended the month in positive territory. Gains achieved in Malaysia and the Philippines were more muted.

Emerging markets

Emerging market (EM) equities posted a marginally positive return in August, significantly outperforming developed markets. This was despite weakness towards month-end as global recessionary fears increased, and as the US Federal Reserve (Fed) maintained a hawkish tone.

Turkey was the best performing market in the EM index, delivering double-digit returns. The central bank issued a surprise interest rate cut during the month, despite inflation near 80%. Brazil outperformed as opinion polls narrowed ahead of October’s presidential election. Thailand and Chile also finished ahead of the index, as did India which benefited from improved macroeconomic data releases, including an easing in inflationary pressure. Despite weaker oil prices over the month, both Saudi Arabia and Qatar outperformed.

China delivered a small positive return, but slightly underperformed the index. While monetary and fiscal policies announced during the month were supportive, a resurgence in Covid-19 infections prompted further lockdowns, and macroeconomic data continued to point to sluggish domestic demand.

Hungary underperformed as the central bank hiked interest rates again – this time by 100bps to 11.75% – and raised the required reserves ratio from 1% to 5%. Taiwan and Korea both lagged the index with currency weakness weighing on returns against a backdrop of ongoing hawkishness from the Fed and concerns about global growth. Geopolitical tension, as US Speaker Nancy Pelosi visited Taiwan despite protests from Chinese authorities, was a further drag on Taiwan’s performance.

The Czech Republic and Poland were the weakest EM markets, negatively impacted by the deteriorating outlook for energy supply. Not only has the European gas crisis escalated but local coal shortages in Poland ahead of winter threaten the country’s power production. Coal is the main fuel for Polish power production and the government’s ban on Russian imports came into effect in August.     

Global Bonds 

Government bond yields rose sharply, meaning prices fell, as inflation remained elevated and central banks reaffirmed a commitment to reining in price increases.

The Federal Reserve (Fed) held its annual conference at Jackson Hole against a backdrop of multi-decade high consumer price inflation (CPI) across major economies. While concerns of an economic downturn are rising, Fed Chair Powell nevertheless stuck to a hawkish message.

Powell said the Fed would not “pivot”, or shift course from raising rates, though the US may see slower growth for a “sustained period”. Data, particularly the labour market, has so far been remarkably resilient, although the housing market continued to deteriorate. The US 10-year Treasury yield rose from 2.64% to 3.13%, with the two-year rising from 2.90% to 3.45%.

The UK gilt market underperformed most other global government bond markets. Inflation hit 10% in July, which was higher than the market expected and raised expectations of a faster pace of rate hikes. Political uncertainty and the much anticipated fiscal response to the energy crisis also weighed on the market. The Bank of England (BoE) raised interest rates by 0.5% to 1.75% at the start of the month.

Like the Fed, the BoE is prioritising the need to curb inflation. Governor Andrew Bailey predicted the UK will fall into a long recession later this year. The UK 10-year yield increased from 1.86% to 2.80% and the two-year from 1.72% to 3%.

In Europe, inflation remained high and members of the central bank’s executive board, speaking at Jackson Hole, said policy would need to remain tight for an extended period. Germany’s 10-year yield rose from 0.82% to 1.53%.

Corporate bonds saw negative returns though US investment grade (IG) and euro high yield outperformed government bonds. (Investment grade bonds are the highest quality bonds as determined by a credit rating agency; high yield bonds are more speculative, with a credit rating below investment grade).

In emerging markets (EM), corporate bonds saw modest positive returns led by high yield. Local currency and hard currency sovereign bonds were generally weaker. EM currencies were mixed versus the US dollar.

Convertible bonds protected well against the equity market headwinds with the Refinitiv Global Focus index shedding just -0.5% in August. The month saw US$7 billion in new convertible bonds coming to the market which translates into a relatively normal month in terms of new issuance. Despite the previous lack of supply since the start of the year, convertible valuations continue to be cheap, reflecting the general ‘risk off’ mood within the market.

Commodities

The S&P GSCI Index recorded a negative performance in August, driven by weaker energy and precious metal prices. Energy was the worst-performing component of the index, with sharply lower prices for unleaded gasoline, crude oil and Brent crude offsetting prices gains for natural gas and heating oil. Within the precious metals component, the price of silver was sharply lower, while the decline in the price of gold was more modest. Within the industrial metals component, there were significant price falls for nickel and aluminium, while declines in the price of lead and copper were more muted. Conversely, the price of zinc increased during August.

Agriculture was the only component of the index to achieve a positive result in August, with sharply higher prices for corn, coffee and cotton. The price of wheat, cocoa and sugar also rose in the month.


The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.

Monthly Markets Review – October 2021

A look back at markets in October, when shares shrugged off worries over inflation to make further upward progress.


  • Global stock markets gained in October, supported by encouraging corporate earnings and an easing of fears around China’s property sector.
  • Government bond yields broadly rose as central banks indicated they were prepared to withdraw monetary policy accommodation in light of rising inflationary pressures.
  • Commodities gained with the energy component performing strongly.   

Please note any past performance mentioned is not a guide to future performance and may not be repeated. The sectors, securities, regions and countries shown are for illustrative purposes only and are not to be considered a recommendation to buy or sell.

US

US equities gained in October. Earnings releases were generally strong, with a positive update from Caterpillar – often seen as an economic bellwether – setting a positive tone. There were, however, notable disappointments from Apple and Amazon. Apple cited supply disruption – principally regarding chip availability – as responsible for softer revenues, while Amazon alluded to labour shortages adding to costs.

Economic data indicated a marked slowdown in activity. In Q3, US GDP growth was the slowest in over a year at an annualised 2.0% quarter-on-quarter, down from 6.7% in Q2. But data also suggested that consumer confidence is very high. Supply chain disruption and consequent shortages of big-ticket items such as vehicles appears to have curtailed spending more than a fall in demand.

The economic releases did not dissuade the Federal Reserve (Fed) from its plans to taper quantitative easing to a full stop by mid-next year. Elevated inflation figures are still held by the central bank to be transitory.

Some of the strongest returns in the month came from the consumer discretionary and energy sectors. Gains in the consumer staples and communication service sectors, while positive, were more muted.

Eurozone

Eurozone shares posted gains in October. The Q3 corporate earnings began in the month and showed ongoing evidence of strong demand, although cost pressures are also beginning to be felt. The top performing sectors included utilities, IT and consumer discretionary. Underperforming sectors included communication services and real estate.

The month brought soaring power prices amid shortages of natural gas. However, prices declined towards month end after Russian President Putin called for Gazprom to start filling European storage facilities. The Spanish government backed away from plans to impose a tax on “excess profits” made by utility companies. This helped the share prices of southern European utilities to rebound after steep falls in September.

Euro area annual inflation was estimated at 4.1% for October, up from 3.4% in September. However, the European Central Bank (ECB) reiterated that it expects the current spike in inflation to prove transitory. Meanwhile, Q3 GDP growth was 2.2%, compared to 2.1% in Q2.

Forward-looking data indicated that supply bottlenecks are starting to weigh on growth. The flash composite purchasing managers’ index (PMI) was 54.3 in October, a rate that still indicates economic expansion but is a six-month low. The PMI is based on company surveys, with a reading above 50 indicating expansion and below 50 indicating contrction.

In Germany, talks continued over the formation of the next governing coalition. It will likely comprise social democrats, greens and liberals and be led by Olaf Scholz, the current finance minister. There is also changing coming at the Bundesbank (Germany’s central bank) after Jens Weidmann said he would step down from his position as head of the bank at the end of this year.  

UK

UK equities rose over October, helped by a strong start to the Q3 reporting season. Internationally focused sectors led the market higher, including financials, with banks in particular performing very well. Financials performed well amid growing expectations that the US Federal Reserve and Bank of England (BoE) would soon react decisively to rising inflationary pressures.

That large cap internationally focused banks recovered so well was reflective of how heavily influenced they are by short-term market interest rates in the US, which picked up markedly. Meanwhile, a number of UK large caps exposed to China also enjoyed something of a recovery, reversing some of their recent underperformance.

Expectations that the BoE might become the first of the world’s major central banks to raise rates also, in part, explained the poor performance of a number of the UK domestically focused areas of the market. This was evident for the consumer-facing domestic sectors, such as housebuilders, and, more widely, was reflected in the underperformance of UK small and mid cap (SMID) equities.

Fears around the potential reimposition of restrictions as Covid infections picked up also weighed on the UK retailers, which continued to report supply disruptions, as evidenced by continued gaps on shop shelves. Signs of a recent recovery in economic momentum and some good news on the outlook for the economy within the Budget were insufficient to lift sentiment.

Japan

The Japanese stock market declined by 1.4% in October as investors digested the prospects for new prime minister Kishida, ahead of the general election which took place on 31 October. Global news flow was generally negative in the first half of October, especially from China, but the sustained strength of US markets provided some support for Japan. The yen continued to weaken against the US dollar, reaching levels last seen in late 2018.

Expectations for the ruling Liberal Democratic Party’s (LDP) election performance under Mr Kishida’s leadership were modest, with the party bracing itself to lose up to 40 seats. In the event the LDP lost only 15 seats and retained a solid majority in its own right. Together with seats gained by its partners, the ruling coalition retains majorities on all standing committees and therefore complete legislative control.

Although the headline results have considerably improved the stability of the new administration, the election was not all plain sailing. One of Mr Kishida’s key allies in the LDP lost his seat and the electorate also delivered a potentially important message in the strong gains made by the reform-oriented Ishin party.

The political focus will now shift to a substantial fiscal stimulus package, details of which should be announced later in November. This is likely to include direct cash handouts to households in an effort to kick-start a consumption recovery in the first half of 2022, following on from the lifting of the state of emergency at the end of September.

Economic data released in October provided few surprises, although the Bank of Japan’s own assessment has improved somewhat, despite caution over higher commodity prices and supply-chain constraints.

Asia (ex Japan)

Asia ex Japan equities rose in October. Shares rallied at the start of the month, driven by positive earnings guidance and an ongoing decline in the number of new Covid-19 cases in many countries in the region. However, shares were weaker towards the end of the month with ongoing concerns over rising energy prices and higher inflation weighing on investor sentiment. Continuing tensions between the US and China on a number of issues including Covid-19, cyber security and computer chips also dented market returns towards the end of October.

Pakistan was the best performing market in the index, reversing its position as the worst performing market a month earlier. Indonesia also recorded a robust performance in the month. China recorded a modestly positive performance, with property stocks rallying after real estate group Evergrande made an interest payment on its debt during the month, allaying fears over a potential default and spill over into the wider market. Stocks in Hong Kong also achieved modest gains during the month.

South Korea was the weakest index market during October as foreign and institutional investors took profits after quarterly earnings reached all-time highs. However, these losses were offset by gains from technology stocks as solid earnings boosted chip makers. Indian equities were also weaker during the month and underperformed the broader market in October as concerns over inflation weighed on investor sentiment and weaker tech stocks outweighed gains in banking stocks.

Emerging markets

Emerging market (EM) equities recorded a positive return in October. Egypt was the best performing market in the index, aided by strong performance from Commercial International Bank. Peru, where political concerns moderated, Argentina and Pakistan all posted robust returns and outperformed the index. Indonesia, a beneficiary of higher coal prices, Russia, Qatar, Saudi Arabia, and Kuwait outperformed amid energy price strength.

China also finished ahead of the broader index, driven by a pick-up in several internet and e-commerce stocks which were negatively impacted by regulatory actions earlier this year.

By contrast, Brazil registered a decline, amplified by currency weakness, and was the weakest market in the index. During the month the government announced additional welfare spending, raising concerns over the fiscal outlook. Meanwhile, with inflation climbing to 10.25% year-on-year, the central bank continued to tighten monetary policy, hiking its key interest rate by 150bps to 7.75%.

Chilean equities were also firmly down amid political uncertainty ahead of next month’s presidential election, and concerns over a fourth pension withdrawal. India and South Korea also recorded negative returns and underperformed the index amid disappointment in Q3 earnings results. 

Global Bonds 

Government bond yields broadly rose as central banks indicated they were prepared to withdraw monetary policy accommodation in light of rising inflationary pressures. Yield curves were generally flatter on the month, with yields at the shorter end of the curves moving markedly higher, but falling in longer dated maturities.

The US 2-year Treasury yield increased from 0.28% to 0.50% with the 10-year rising from 1.49% to 1.56%. There were further signs of waning economic momentum and the expected start of policy tapering by the Federal Reserve (Fed) moved closer.

In the UK, the 2-year gilt yield rose from 0.41% to 0.71%, while the 10-year yield was one basis point (bps) higher at 1.03%. The Bank of England is still widely expected to be among the first major central banks to raise interest rates.

In Europe, inflation rose to the highest level since 2008 and to a near 30-year high in Germany with the European Central Bank (ECB) commenting that elevated inflation will likely prove transitory. The German 10-year yield rose from -0.19% to -0.09% and the 2-year from -0.69% to -0.58%, while the 30-year yield declined. Italy’s 10-year yield rose from 0.86% to 1.13%. This largely occurred late in October as ECB President Lagarde’s reluctance to push back against higher short-term rates was taken as a hawkish signal.

Within the corporate bond market, US investment grade (IG) was modestly positive and euro IG was negative in terms of total returns (local currency), with both broadly in line with government bonds. High yield (HY) saw negative returns and underperformed government bonds amid broader volatility. Investment grade bonds are the highest quality bonds as determined by a credit rating agency; high yield bonds are more speculative, with a credit rating below investment grade.

Emerging market (EM) government bonds (hard currency) were flat, as small gains in IG offset a small decline in HY, with EM corporate bonds moderately lower. Local currency EM bonds declined, while currency performance diverged.

Convertible bonds benefitted from the equity market tailwind and the Refinitiv Global Focus index, which measures balanced convertible bonds, advanced 1.6%. Overall, convertible bond valuations became cheaper, driven by higher discounts in US names as the universe of US convertible bonds was less sought after.  

Commodities

The S&P GSCI Index recorded a positive performance in October, driven by higher energy prices with demand increasing as the global economic recovery gathers pace. Energy was the best performing component in the month with crude oil and unleaded gasoline both sharply higher. Brent crude, heating oil and gas oil also recorded strong gains in October, while the price of natural gas fell back towards the end of the month following robust gains in September.

The industrial metals component also achieved a positive performance in October driven by a manufacturing-led recovery in many parts of the world, particularly China, and on-going supply chain problems. The agriculture component of the index also gained, with strong gains for cotton, Kansas wheat and wheat. The precious metals component advanced, with silver achieving a robust performance while the percentage increase for gold was more muted.


The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.

Monthly Markets Review – April 2021

A look back at markets in April when shares gained with the US leading the way.


  • Developed market equities gained in April with the US leading the way, buoyed by a swift vaccine roll-out and fiscal stimulus measures.
  • Emerging market shares saw positive returns but lagged developed markets. The pandemic continues to be a major concern in several emerging markets, notably India.
  • The sharp sell-off in US government bonds came to a halt in April, helped by comments from the Federal Reserve.  
  • Commodities gained with agriculture the best-performing index component.

Please note any past performance mentioned is not a guide to future performance and may not be repeated. The sectors, securities, regions and countries shown are for illustrative purposes only and are not to be considered a recommendation to buy or sell.

US

US equities made solid gains in April. Economic data was encouraging overall. Q1 GDP growth of 6.4% (quarter on quarter, annualised) narrowly missed expectations of 6.7%, and the trade deficit widened. Even so, aggregate business activity – as measured by the composite purchasing managers’ index (PMI – an index of business activity based on a survey of private companies in the manufacturing and services sectors) – climbed to 59.7 in March. The gain was led by the service sector, signalling the biggest uptick since 2014. Consumer confidence, while still below its pre-pandemic level, also rose strongly. Meanwhile, 70% of the US population has now had at least one shot of the vaccine.

And while the recent data have been encouraging, the policy environment is set to stay highly accommodative for some time. President Biden has followed up his $1.9 trillion fiscal stimulus bill with a proposed $2 trillion in infrastructure and manufacturing subsidies. The Federal Reserve (Fed) also confirmed its willingness to run the economy “hot” – or above the long-term inflation target – to the support economic recovery and full employment. It further stated it expects its targets for stable economic growth are still “some time” away and that asset purchases would continue until then.  

Investor sentiment was supported by the combined economic and policy backdrops, but also a robust earnings season. Big tech firms were particularly strong – the combined revenues of Alphabet, Amazon, Apple, Facebook and Microsoft jumped 41% in Q1. Consumer discretionary stocks were also buoyant, tallying with rising consumer confidence. Energy and consumer staples lagged the wider index with weaker aggregate gains.

Eurozone

Eurozone shares also gained in April. After the outperformance of lowly valued parts of the market in recent months, higher growth areas tended to perform better in April. At sector level, information technology was among the top performers along with real estate and consumer staples. Energy registered a negative return. Within the consumer discretionary sector, automotive stocks saw some profit-taking after March’s strong gains, while luxury goods fared well. The Q1 earnings season began on a positive note. In particular, several banks have been able to reduce reserves, or lower provisioning levels, because government and central bank support has so far averted a wave of bad loans.

Several countries, including Germany, continued to battle rising Covid-19 infections. However, rates slowed in Italy, enabling the government to loosen restrictions in some regions. Many eurozone countries began to speed up the roll-out of Covid-19 vaccines. Germany’s constitutional court rejected an appeal against the EU recovery fund, which is set to be disbursed from July.

GDP data showed the eurozone economy contracted by 0.6% in Q1. Forward-looking data was more encouraging with the manufacturing PMI survey reaching a new record high of 63.4. Eurozone annual inflation was estimated at 1.6% for April, up from 1.3% in March. However, the core measure, which excludes energy prices, was up just 0.8%. The European Central Bank had quickened the pace of its asset purchases in March, due to the renewed wave of the virus, and confirmed in April that it would maintain this pace so as to avoid a rise in borrowing costs that could jeopardise the economic recovery.  

UK

UK equities performed well, led by small and mid cap stocks as the FTSE 250 index hit all-time highs. The market recorded another strong month despite a partial reversal of the trend for lowly valued stocks (where the UK market is well represented) to outperform. The lowly valued large oil and gas companies underperformed, despite ongoing strength in crude oil prices. Financials also lagged for the majority of April, although they bounced back sharply in the final week following encouraging Q1 results from large cap banks. Mining companies (helped by strong commodity prices) and UK domestically focused stocks escaped the broad rotation away from lowly valued areas.

It was strength in domestic areas of the market which helped propel the FTSE 250 past 22,000 for the first time. Domestic stocks were buoyed by encouraging economic data as the country took additional steps to ease lockdown restrictions, with retailers, housebuilders, business support services companies and construction groups all performing very well. The Office for National Statistics confirmed that UK retail sales had surged in March ahead of the lockdown easing, up 5.4% month-on-month and 7.2% year-on-year, well above expectations for 1.5% and 3.5%. House prices continued to climb strongly in April. Meanwhile, the IHS Markit/CIPS UK Composite Purchasing Managers’ Index rose to 60.0 in April (flash reading), from a final reading of 56.4 in March and its highest level since November 2013.

Japan

The Japanese equity market declined 2.8% in April, although all this move occurred in just two days when investors saw a greater chance that Japan may re-impose restrictions on activity. The yen initially moved sharply stronger against major currencies before retracing about half of the move before month-end.

Although the rate of Covid infections in Japan remains markedly below most other countries, the persistent increase in cases continues to cause concern among the population and has heightened criticism of the government’s response. In addition, the much-anticipated acceleration in Japan’s vaccination programme has so far failed to materialise.

These concerns culminated in the re-imposition of a state of emergency covering Tokyo and three other prefectures from 25 April, just weeks after the previous restrictions were lifted. The current restrictions are planned for only 17 days, which could clearly be extended but the political timing becomes very complicated ahead of the Olympics.

Nevertheless, industrial production data remained solid over the last three months despite various states of emergency being in place for most of the period. The corporate results season began just before the end of April. Only minority of companies had therefore reported in April, but these numbers so far look good against consensus expectations, as they did in the previous quarter.

Asia (ex Japan)

Asia ex Japan equities recorded a modest gain in April as the rollout of Covid-19 vaccines in many parts of the world boosted optimism for a return to economic normality. Taiwan was the strongest index market and outperformed, led by strong gains by non-technology stocks. Resources, industrials, consumer discretionary and financials all outperformed after the US did not name Taiwan as a currency manipulator. Malaysia, Singapore and Hong Kong also achieved modest gains during the month. Conversely, Pakistan was the weakest index market during April. Thailand and India were also weaker during the month.

China achieved a modest gain during the month following two consecutive monthly declines as solid 2020/21 earnings, a temporary weakening of the US dollar and less stretched valuations buoyed market sentiment. Healthcare, materials and staples led the Chinese market while real estate, utilities and financials underperformed during the month. In India, increasing cases of Covid-19 weakened market sentiment as the number of new infections and deaths surged during the month. Healthcare and materials outperformed while consumer staples and consumer discretionary lagged. Mid-caps and small caps outperformed large caps in April. Indonesia and the Philippines both recorded a modest decline over the month, while Korean equities achieved a positive performance in April. 

Emerging markets

Emerging market (EM) equities recorded a gain in April aided by dollar weakness but underperformed developed markets. Covid-19 continues to be a concern in several EM, with India suffering a notable surge in cases during the month, while the pace of vaccinations in many EM remains slow.

Poland was the best-performing market in the MSCI EM index as the government began to ease lockdown restrictions late in the month. Taiwan, Argentina, and Greece, where the government announced plans to open up its tourism industry in May, all outperformed the index. Brazil also finished ahead of the index, supported by higher commodity prices and currency strength.

Political uncertainty in all three Andean countries contributed to their underperformance in April, with Chile the weakest market, followed by Colombia and Peru. Pakistan and Thailand also recorded negative returns and underperformed the index. In Thailand, a rise in Covid cases raised doubts about the timing of the economic recovery, particularly in tourism.

Global Bonds 

The sharp sell-off in US government bonds came to a halt in April, helped by comments from the Federal Reserve (Fed). European yields rose (i.e. prices fell), continuing to diverge from the US, due to rising growth and inflation expectations. With continued optimism over the economic recovery, corporate and emerging market bonds performed well and the US dollar weakened.

The US 10-year Treasury yield declined by 11 basis points (bps) to 1.63% for the month. Echoing the previous month’s comments, the Fed acknowledged improvements in the economy and a better outlook, but clearly downplayed any prospect of removing policy support. The US economy grew at an annualised 6.4% in Q1, beating expectations.

In Europe, the German 10-year yield rose by 9bps to -0.20%. In the “periphery”, Italy’s 10-year yield increased by 24bps to 0.90% and Spain’s by 14bps to 0.47%. European yields had shown a degree of resilience to the global sell-off in yields in recent months. In April, expectations for growth and inflation picked up. Inflation in Germany rose above 2% for the first time in five years, although this was due to higher energy prices compared to a year ago. The UK’s 10-year yield was unchanged at 0.84%.

Corporate bonds produced positive returns and outperformed government bonds. US credit led the way, with investment grade slightly ahead of high yield, supported by falling yields. European investment grade was flat, but ahead of government bonds, while high yield made positive returns.  

Emerging market (EM) bonds gained, led by local currency, as the US dollar weakened. EM hard currency debt performed well, with high yield bonds gaining over 3.5%. EM corporate bonds made more moderate positive returns.

The Refinitiv Global Focus index, which measures balanced convertible bonds, advanced 1.3%. Valuation for convertible bonds cheapened slightly, especially for some US technology and growth companies.

Commodities

In commodities, the S&P GSCI Index made a modestly positive return. Agriculture was the best-performing component with strong gains recorded for corn and wheat. Sugar and coffee also achieved robust gains. The industrial metals component also performed well, led by gains for copper and nickel. Energy was lifted by gains for natural gas and oil. Precious metals were modestly higher, with small gains for both gold and silver. Livestock fell, led lower by sharp declines in feeder cattle and live cattle. The precious metals component was lower, with sharp declines recorded by both silver and gold.


The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.

Monthly Markets Review – February 2021

A look back at markets in February when optimism over vaccination programmes helped spur gains for shares and commodities.


  • Global equities gained in February, with lowly-valued parts of the market faring well. Vaccine optimism ultimately trumped fears that a stronger-than-expected economic rebound could alter the trajectory of monetary policy.
  • Government bonds saw a sharp sell-off in late February. Corporate bonds outperformed government bonds in the month.
  • Commodities gained with energy the best-performing index component as crude oil prices continued to rise.

Please note any past performance mentioned is not a guide to future performance and may not be repeated. The sectors, securities, regions and countries shown are for illustrative purposes only and are not to be considered a recommendation to buy or sell.

US

US equities survived a bout of turbulence to post gains in February. Fears that a rapid economic recovery would hasten policy tightening rattled bond markets before rippling into  equities, especially tech. As the fears receded, markets recovered. Sectors that are most sensitive to the economic cycle – such as energy, financials, and industrials – performed strongly. More traditionally defensive sectors, such as utilities and consumer staples, lagged.

Eurozone

Eurozone equities gained in February, supported by a strong advance for lowly-valued parts of the market such as banks. The energy sector also posted robust gains. Defensive sectors such as utilities and real estate were among the laggards. Eurozone annual inflation was confirmed at 0.9% for January and GDP was down by 0.6% in Q4 2020. The Italian parliament approved the formation of a new government to be led by former European Central Bank chairman Mario Draghi.

UK

UK equities also performed well, further reversing some of the underperformance suffered during the global pandemic’s initial stages. The market responded well to progress on vaccinations. Lowly valued and domestically focused areas outperformed.

Japan

Japanese equities rose sharply in early February, before giving up some of the gains. There was some rotation out of growth-style stocks and the market was led by lower quality factors (lower quality stocks tend to have more volatile earnings, weaker balance sheets and lower profit margins). Smaller companies underperformed. The Covid-related state of emergency should be lifted in early March and the vaccine roll-out is underway following the first regulatory approvals, which were granted in mid-February. Recent strong corporate results have led to upward revisions to estimates and increased expectations for a full corporate earnings recovery.

Asia (ex Japan)

Asia ex Japan equities achieved a modest gain in February. Progress on the global roll-out of Covid-19 vaccines, and the prospect of US fiscal stimulus, boosted investor optimism. However, expectations for higher inflation prompted a sell-off towards the end of the month. India was the best-performing index market as the Union Budget announcement boosted sentiment. Hong Kong and Taiwan, where strong performance from IT stocks supported gains, both finished ahead of the index. Conversely, Pakistan was the weakest index market. China also finished in negative territory, amid weakness from internet stocks.   

Emerging markets

Emerging market (EM) equities recorded small gains. Early progress was driven by vaccine optimism and expectations for US fiscal stimulus, but were partly offset by concerns over stronger growth and higher inflation. A stronger dollar was also a headwind for EM. Argentina was the best-performing market in the EM index. Chile and Peru, aided by commodity price strength, and Greece, where hopes for a recovery in tourism picked up, all outperformed. Brazil was the weakest index market, negatively impacted by policy concerns. China also finished in negative territory and underperformed the index, with weakness from internet and IT stocks dragging on performance.

Global Bonds 

In fixed income, government bonds saw a sharp sell-off in late February, with corporate bonds outperforming. Having risen steadily on expectations of substantial US fiscal stimulus, government yields lurched higher late in the month (meaning prices fell), as a US Treasury bond auction saw muted demand. The US 10-year Treasury yield rose 36 basis points (bps) to 1.43%. Italian government bonds outperformed German, as investors welcomed the appointment of Mario Draghi as prime minister. The UK 10-year yield increased by 49bps to 0.82%, reflecting optimism around the UK’s fast vaccine roll-out and plans for easing lockdown.

Corporate bonds outperformed government bonds. Investment grade produced negative total returns amid the global sell-off in yields, but high yield delivered gains. Investment grade bonds are the highest quality bonds as determined by a credit rating agency; high yield bonds are more speculative, with a credit rating below investment grade. Emerging market (EM) bonds declined overall. EM corporate bonds registered a relatively small decline, outperforming EM sovereigns, and EM high yield produced positive returns. EM currencies weakened in the final week of the month as US Treasury yields rose.

The Refinitiv Global Focus index, which measures balanced convertible bonds, advanced 3.1% compared to the MSCI World equity index’s gain of 2.6%. Given the demand for convertibles, valuations rose and the overall asset class is now slightly expensive. At the same time, the weaker technology sector resulted in US convertibles giving up some of their previous high valuations. 

Commodities

In commodities, the S&P GSCI posted a robust return as the continued roll-out of Covid-19 vaccinations supported the outlook for a strong recovery in global growth. Energy was the best-performing index component as crude oil prices continued to pick up. The industrial metals component performed well, led by strong gains for copper, often viewed as bellwether for the global economy, and aluminium. The agriculture component achieved a modest gain in the month, boosted by higher coffee, sugar and cotton prices. The livestock component posted a moderate return, with a strong gain for live hogs. By contrast, the precious metals component registered a negative return in the month, with both gold and silver weaker.


The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.

Monthly Markets Review – January 2021

An overview of markets in January when emerging market equities outperformed their developed market peers.


  • January saw divergent performance for shares, with developed market equities ending the month lower while emerging market equities posted positive returns.
  • The month saw volatility from abnormal and targeted trading, along with concerns over the pace of vaccine roll-outs.
  • Government bond yields generally rose (meaning prices fell). In the US, the Democrats secured control of Congress to raise expectations of more fiscal stimulus.
  • Commodities gained with energy the best-performing index component as Saudi Arabia unexpectedly announced a unilateral cut in output.

Please note any past performance mentioned is not a guide to future performance and may not be repeated. The sectors, securities, regions and countries shown are for illustrative purposes only and are not to be considered a recommendation to buy or sell.

US

US equities declined. Unusual and highly targeted trading from a cohort of retail investors contributed to a rise in market volatility, dampening risk appetite that had pushed the S&P500 to a new high.

The volatility overshadowed optimism earlier in the month, stemming from an anticipated fiscal stimulus boost following President Biden’s inauguration. The Federal Reserve said the pace of the US economic recovery had weakened. Consumer staples and industrials were amongst the weaker market areas, while energy and healthcare were more resilient.

Eurozone

Eurozone shares fell in January. A relatively slow roll-out of Covid-19 vaccines dominated the headlines. Also denting sentiment was political turbulence in Italy that led to the resignation of Prime Minister Conte. The European Commission’s consumer confidence survey fell by 1.7 points compared to December. Data showed the German economy grew by 0.1% in Q4 2020, while French GDP shrank 1.3%.

The healthcare and IT sectors posted positive returns. The weakest sectors were real estate and consumer staples.

UK

In the UK, the FTSE All-Share index posted negative returns in January amid weakness in the financials, industrials and consumer goods sectors. Other sectors saw gains, with oil & gas and basic materials among the best performers.

The roll-out of vaccines picked up speed but lockdown restrictions weighed on economic activity. The composite purchasing managers’ index, a measure of service and manufacturing sector activity, fell to 40.6 in January from 50.4 in December (a reading below 50 indicates contraction).

Japan

Japanese equities traded higher in the first half of January, helped by positive statements from the US Federal Reserve, before falling at the very end of the month to leave a total return of just 0.2%. Having strengthened against the US dollar for most of 2020, the yen ended January slightly weaker. Small caps underperformed again in January, having been particularly weak in the first half of the month.

The Japanese economy has dipped back into deflation, although this is currently due to a series of temporary factors, including lower utility prices and mobile phone charges.

Asia (ex Japan)

Asia ex Japan equities registered a strong gain as the global roll-out of Covid-19 vaccines and expectations for additional US fiscal stimulus boosted investor optimism. However, concerns over a delayed exit from the pandemic contributed to a sharp sell-off at the end of the month.

China, where domestic economic data remained firm, and Taiwan, which benefited from strong performance in technology names, led the index higher. Hong Kong, Singapore and South Korea ended the month in higher but underperformed the Asia ex Japan index.

Emerging markets

Emerging market equities recorded a positive return as investors anticipated a return to social normality and economic recovery. This was despite a sell-off towards month end on concerns of a Covid-19 resurgence. The UAE and Egypt were the best performing markets in the index.

China outperformed the index, aided by strong performance from e-commerce and internet stocks. Brazil lagged with currency weakness dragging on returns. Protests held during the month called for President Bolsonaro’s impeachment, amid dissatisfaction over the response to Covid-19. India also finished in negative territory. 

Global Bonds 

In fixed income, government yields rose early in the month (meaning prices fell). In the US, the Democrats secured control of Congress to raise expectations of more fiscal stimulus. The US 10-year yield increased by 18 basis points (bps) to 1.09% over the month. The UK 10-year yield trod a similar path, rising just over 13bps, to 0.33%. In Europe, yields rose early on too, but were balanced by perceived hawkishness from the European Central Bank (ECB) and rising political risk in Italy. The German 10-year finishing 5.5bps higher at -0.52%.

For corporate bonds, investment grade credit saw negative total returns. Investment grade bonds are the highest quality bonds as determined by a credit rating agency; high yield bonds are more speculative, with a credit rating below investment grade. US credit outperformed US Treasuries, while the euro and sterling markets were in line with government bonds. Global high yield credit markets made moderate positive returns, mainly due to income. Hard currency emerging market (EM) debt weakened 1%, while EM corporate and local currency debt was marginally lower.

After a positive start to the year, global stock markets shed their gains and posted a loss for the month. Convertible bonds played to their advantages and participated in the strong first three weeks of trading, then protected well on the downside. The Refinitiv Global Focus index, which measures balanced convertible bonds, advanced 0.3%. With strong demand for the asset class, convertible valuations became more expensive, especially in the US.

Commodities

In commodities, the S&P GSCI Index posted a strong return as the ramp-up of vaccination programmes in a number of countries boosted hopes of a return to economic normality in 2021. This was in spite of concerns later in the month over a delay to the recovery.

Energy was the best-performing index component as spot crude oil prices picked up. Although OPEC+ modestly increased production in January, Saudi Arabia unexpectedly announced a unilateral cut in output. (OPEC+ is the Organisation of the Petroleum Exporting Countries, plus Russia and nine other oil producing countries). The agriculture component also recorded a solid return. The industrial metals component achieved a small gain; nickel rallied but zinc was firmly down. By contrast, the precious metals component registered a negative return, amid a weaker gold price.


The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.