Monthly Markets Review – November 2021

A review of markets in November when the identification of a new Covid-19 variant sent shares lower.

  • Global equities fell in November, with fears over the new “Omicron” variant of Covid-19 weighing on sentiment.
  • In bond markets, weaker risk appetite led government bond yields lower (meaning prices rose).
  • Commodities fell with oil prices lower amid worries the new variant could result in reduced demand.  

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 stocks traded slightly lower in November. Investors grappled with both a hawkish tilt to commentary from the Federal Reserve (Fed) and the emergence of a new coronavirus variant. Chair of the Fed, Jerome Powell, noted that the strength of the US economy combined with the threat of persistently higher inflation meant a swifter tapering of asset purchases – currently under way at a rate of $15 billion a month – is under consideration. At the same time, the emergence of the Omicron variant of Covid-19 has cause some to question the sustainability of the economic strength and advocate for more patience.

As it stands, unemployment in the US is low, having fallen to 4.6% in the latest (October) release from 4.8% in September. Retail sales have been growing for several months and industrial activity, as measured by composite PMI data, is robust. But pent-up demand continues to vie with supply constraints, adding to other contributing factors in higher inflation such as stimulus measures. Consumer price index inflation (CPI) rose 0.9% last month after gaining 0.4% in September, significantly higher than expectations.

The S&P500 declined slightly over the month, as investor sentiment stabilised towards month end. The financials, communication services and energy sectors were amongst the weakest areas of the market. The technology and consumer discretionary sectors held up better, eking out small gains. In particular, US chipmakers gained strongly on expectations that despite current supply constraints, robust demand should ultimately be reflected in future earnings.


Eurozone shares fell in November as rising Covid-19 cases saw some countries re-introduce some restrictions on activity. At the end of the month, the discovery of a new “variant of concern” added to investors’ worries that more restrictions may be needed, potentially damaging business activity.

The weakest sectors for the month were energy and financials. Sectors that are sensitive to the economic reopening and recovery fell on fears the new Omicron coronavirus variant could result in lower demand. The best performing sector was communication services amid merger & acquisition activity. Private equity group KKR launched a €33 billion takeover offer for Telecom Italia.

The flash November estimate put eurozone annual inflation at 4.9%, up from 4.1% in October and well above the European Central Bank’s 2% target. It is the highest inflation level in the single currency era. However, the European Central Bank (ECB) remained reluctant to tighten monetary policy. Christine Lagarde, president of the ECB, said that the current price pressures would fade by the time tightening measures took effect.

Germany’s coalition talks reached a conclusion. Olaf Scholz of the Social Democrats (SPD) will succeed Angela Merkel as chancellor with his party in a coalition government with the Greens and Free Democrats (FDP). Climate targets are expected to be a key focus for the new government. Meanwhile, the EU released its first ever estimates of quarterly greenhouse gas emissions. This showed emissions for Q2 2021 were up 18% on the previous year, when activity was hit hard by Covid-19 lockdowns.


UK equities fell over November. In line with many other markets, economically sensitive areas underperformed, including the energy (sharp decline in oil prices) and financial sectors. Areas reliant on reopening, such as the travel and leisure sector (airlines, hotels) performed particularly poorly. This occurred as international travel restrictions as well as domestic measures were reintroduced in response to Omicron.

Financials lagged due to a combination of factors related to the news that the Covid variant was of concern to world health authorities. These related factors included fresh uncertainty as to when developed market central banks might raise interest rates. Additionally, the expectation that China would maintain a zero tolerance approach to the virus added to fears the variant would have a severe impact on business activity, and on UK quoted companies exposed to the country.

At the beginning of November the Bank of England (BoE) refrained from increasing base lending costs, confounding expectations it would become the first major developed market central bank to do so. Some domestically focused areas of the market proceeded to bounce back on this news, reversing underperformance of recent months, when it was thought the BoE would be forced to cool economic activity to get a handle on consumer price inflation.

Consumer-facing domestic sectors, such as housebuilders and retailers, and domestically focused travel and leisure stocks, such as pub companies, helped small and mid-cap (SMID) equities recoup some of the ground lost since the summer –  up until the point of the Omicron news. Many of these companies then experienced very sharp sell-offs as some Covid restrictions were reintroduced, including the wearing of face masks, which contributed to UK SMIDs underperforming over the month as a whole.


The Japanese stock market declined by 3.6% in November as initial optimism over the reopening of Japan’s domestic economy was reversed sharply in the final week on news of the Omicron variant. Currency markets also changed direction, with yen weakness in the early part of the month quickly reversed as investors sought safe-haven assets during a period of greater uncertainty.

Renewed short-term uncertainty over the new Covid variant has temporarily obscured an increasingly positive outlook for Japan. Prior to this, a stable political situation had emerged as Prime Minister Kishida formed his new cabinet after the general election at the end of October. Details also gradually emerged in November of a substantial fiscal stimulus package, which is slightly larger than previous expectations and could have a significant impact on GDP in 2022.

The government is making a significant effort to reinforce the recovery in the domestic economy following the lifting of the state of emergency at the end of September. Within the stimulus package, there is a particular focus on boosting consumption, by giving direct cash handouts. Although the timing of the package was not a surprise, the actual content has been influenced somewhat by the change in prime minister and the strength of the LDP’s victory in the general election.

Economic data released in November provided few surprises as higher commodity prices and supply-chain constraints continue to impact the economy. Industrial production numbers are also influenced by the production cuts announced by Japanese auto makers as a result of the global semiconductor shortage. Historic data for Q3 GDP, released in mid-November, showed a contraction in the overall economy, primarily due to the state of emergency that remained in place throughout the quarter, but this result had no major influence on sentiment. Meanwhile, inflation crept back into positive territory as several one-off factors begin to drop out, but there is still little chance of Japan experiencing a short-term inflation spike as seen elsewhere.

Asia (ex Japan)

Asia ex Japan equities declined in November amid a broad market sell-off following the emergence of the Omicron variant of Covid-19. Investors feared the new variant could derail the nascent global economic recovery. The news comes amid a surge in new Covid-19 cases in some parts of the world.

Singapore was the worst-performing index market in November as investors continued to track developments surrounding the new Covid-19 variant and whether existing vaccines would prove to be less effective. There were fears that the city-state’s government may have to scale back some recently relaxed curbs. Chinese stocks were also sharply lower in November, along with neighbouring Hong Kong, on fears that new lockdown measures would be instigated following the rapid spread of a new Covid-19 variant.

Share prices in Thailand, South Korea and Malaysia recorded significant declines in November. Share prices were also weaker in Indonesia and India in the month, although the declines were less pronounced than in some index markets. Taiwan and the Philippines were the only index markets to achieve a positive return during November, although the gains in both markets were modest.

Emerging markets

Emerging market equities were down in November as early month gains were more than erased. Market expectations for earlier Fed policy tightening, together with uncertainty over the outlook for growth and inflation created by the Omicron variant, weighed on risk appetite.

Turkey, where the lira depreciated by more than 27%, was among the weakest markets in the MSCI EM index. During the month the central bank continued to cut its policy rate, despite ongoing above target inflation. Hungary and Poland underperformed amid concern that more rapid interest rate hikes could be required. Net energy exporters, notably Russia but also Saudi Arabia and Colombia, lagged as crude oil prices fell. China underperformed the index, while markets which were set to benefit from ongoing economic reopening, such as Thailand and Greece, also finished behind the index.

Conversely, the UAE was the best performing market in the MSCI EM index, supported by strong performance from telecoms company Etisalat Group. Chile, where first round presidential election results were well received by markets, the Philippines and Taiwan all posted positive returns and outperformed. Taiwanese equities were led higher by semiconductor related names which benefitted from rising expectations for metaverse, or augmented reality, demand growth.   

Global Bonds 

The emergence of the Omicron Covid-19 variant punctured risk sentiment in November. Government yields fell and the US dollar rallied, while stocks and high yield credit sold off. The oil price fell sharply due to concern over global demand.

Yields were buffeted through the month, as inflation indices in the US, Europe and UK remained elevated. The US consumer price index rose 6.2% year over year in October, the highest level since 1990.

The US Federal Reserve rhetoric turned increasingly hawkish over the course of the month. Chair Powell and other members of the policy committee suggested tapering could be accelerated and that they may stop referring to inflation as “transitory”. Nevertheless, the US 10-year Treasury yield fell from 1.56% to 1.46% over the month, with an intra-month high of 1.69%. The yield curve flattened further, as the 2-year yield rose from 0.50% to 0.57%.

The German 10-year yield fell from -0.09% to -0.34%. The Italian 10-year yield from 1.13% to 0.98%. European Central Bank (ECB) President Christine Lagarde told the European Parliament that rate rises next year are unlikely. Eurozone inflation rose 4.1% year on year in October.  

The UK 10-year yield fell from 1.03% to 0.81%, moving markedly lower as the Bank of England left the policy rate unchanged, against market expectations.

The risk-off move was reflected in corporate bonds. Investment grade credit saw flat total returns (local currency), but underperformed government bonds. High yield (HY) declined, with spreads widening sharply in the final week of the month. US HY fell -1.0% while the euro market declined -0.6%. 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.

There was mixed performance across both hard and local currency emerging market (EM) debt. EM currencies declined. The Turkish lira fell sharply as the central bank cut rates despite a double digit rate of inflation.

Convertible bonds were dragged down by equity market headwinds and shed -2.6% for November. Primary markets were strong and $17 billion of new convertibles were launched. The combination of falling equity markets and strong primary market supply resulted in a general cheapening of convertible bonds. Valuations of European convertibles were hit the most.


The S&P GSCI Index recorded a negative performance in November, driven lower by sharp declines in the price of oil following a broad market sell-off triggered by the emergence of the Omicron variant of Covid-19.

Energy was the worst performing component of the index in November. The industrial metals component also recorded a negative performance in November, with lower prices for zinc, lead, aluminium and copper. The precious metals component also declined in November, with lower prices for both silver and gold. The agriculture component was negative overall, with a sharp decline in the price of cocoa. Conversely, the price of coffee was significantly higher in November. Livestock was the only component of the index to record a positive performance in November.

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 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 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 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.


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.  


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.

Quarterly Markets Review – Q3 2021

A look back at markets in Q3, which started well for shares but then saw gains erased amid rising inflation and worries over China.

  • Developed market shares were flat (in US dollar terms) in Q3. Declines in September erased prior gains. Emerging market equities underperformed amid a sell-off in China.
  • Global sovereign bond yields were little changed in the quarter. The US Federal Reserve said it would soon slow the pace of asset purchases.
  • Commodities gained with natural gas prices seeing a sharp spike.   

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 equities notched up a small positive return in Q3. Strong earnings had lifted US stocks in the run up to August, when the Federal Reserve (Fed) seemed to strike a dovish tone, confirming its hesitance to tighten policy too fast. However, growth and inflation concerns late in the quarter meant US equities retraced their steps in September.

The Fed stated in September that tapering of quantitative easing (i.e. a slowdown in the pace of asset purchases) will be announced at the November meeting, as expected, and will finish by mid-2022. Meanwhile, the fed funds rate projections now show a faster rate hiking schedule than they did in June. The median rate expectation for 2023 moved up to three hikes from two in June, with three additional hikes in 2024. Fed officials were evenly split 9-9 on a rate hike in 2022.

The shift comes in the context of revised real GDP growth – down to 5.9% for 2021 from the 7% growth estimated in the last meeting – while inflation has risen. The Fed now sees inflation running to 4.2% this year, above its previous estimate of 3.4%. The Fed raised its GDP projections for 2022 and 2023 to growth of 3.8% and 2.5%, respectively.

On a sector basis, financials and utilities outperformed. At the other end of the spectrum, industrials and materials struggled, although September’s sell-off hit almost all sectors. Energy was an exception, rising as supply constraints drove prices to highs – particularly Brent crude.


Eurozone equities were flat in Q3. The energy sector was one of the strongest performers, as was information technology with semiconductor-related stocks seeing a robust advance. Consumer discretionary stocks were among the weakest for the quarter, with luxury goods companies under pressure amid suggestions that China could seek greater wealth redistribution, which could hit demand.

The quarter had started with gains amid a positive Q2 earnings season and ongoing economic recovery from the pandemic. The Delta variant of Covid-19 continued to spread but most large eurozone countries have now fully vaccinated around 75% of their population against the virus, enabling many restrictions on travel and other activities to be lifted.

However, as the period progressed, worries emerged over inflation due to supply chain bottlenecks and rising energy prices. Annual inflation in the eurozone was estimated at 3.4% in September, up from 3.0% in August and 2.2% in July. The European Central Bank said that it would tolerate any moderate and transitory overshoot of its 2.0% inflation target.

The end of the period saw a surge in power prices as a result of low gas supply and lack of wind over the summer, among other factors. High power prices should be positive for utility firms. However, the sector – particularly in southern Europe – is susceptible to political intervention as evidenced by announcements of price caps in Spain and other countries. The utilities sector was a laggard in the quarter.

Germany held a general election which saw the Social Democrats (SPD) take the largest share of the votes. Coalition talks are now under way over the formation of a new government.


UK equities rose over Q3 with the market driven by a variety of factors. While there were some clear sector winners (such as energy on the back of a recovery in crude oil prices) the difference between the best and worst-performing stocks, or dispersion, was quite marked. Within consumer staples, for instance, some of the more highly valued consumer goods companies performed poorly, while the more lowly valued grocery retailers performed well.

Merger & acquisition (M&A) activity remained an important theme. The period began with a recommended counter-offer for Wm Morrison Supermarkets and bid activity was seen across a variety of areas. Gaming remained an area of interest, with a proposal from US sports betting group DraftKings to acquire Entain. Within industrials there was headline-grabbing bid for aerospace and defence equipment supplier Meggitt. This in part explains the positive contribution from the consumer discretionary and industrial sectors, with the latter also helped by the easing of transatlantic travel restrictions and dollar strength against some weakness in sterling.

Small and mid cap (SMID) equities suffered in line with higher growth areas of the market more generally in September, but performed very well over the quarter a whole. SMID caps remained a sweet spot for M&A activity and made a useful contribution to overall market returns.

The Bank of England took a more hawkish tone as inflationary pressures continued to surpass expectations. Business surveys confirmed that supply bottlenecks are constraining output. Natural gas and fuel shortages made headlines towards the period end. These developments were also reflected in higher market interest rates, which helped support financials. However, Asian focused banks were lower in the period given the growing uncertainty around the outlook for Chinese markets and the economy.


The Japanese equity market traded in a range through July and August before rising in September to record a total return of 5.2% for the quarter. The yen showed little trend against the US dollar for most of the period before weakening at the very end of September to reach its lowest level since the start of the pandemic in early 2020.

Throughout the pandemic, Japan has consistently seen a lower infection rate than most developed countries but faced a much more serious test during early summer as infections picked up rapidly. Public opposition towards the government’s approach ratcheted up again and the approval rate for the Suga cabinet fell to the lowest levels seen since he took office in September 2020.

On 3 September, in a surprise decision, Prime Minister Suga announced his intention to resign without contesting the LDP leadership election. Mr Kishida was ultimately elected as LDP party leader and becomes Japan’s 100th prime minister. An establishment politician within the LDP, Mr Kishida should be essentially a safe, if unexciting, choice to guide Japan through the next stage of its post-Covid recovery. There is unlikely to be a change in the direction of monetary or fiscal policy as a result, and the likely shape of next major stimulus package should emerge over coming weeks..

It now seems likely that the upcoming general election could be held at the earliest practical date, on 31 October or, at the latest, mid November. Mr Kishida also inherits a stronger position in the vaccination programme which has sustained strong momentum in recent months after the very slow start seen in the first half of the year.

Although corporate results for the quarter that ended in June were strong, sentiment was impacted in August by the announcement from Toyota Motor of production cuts in September and October, due to the global shortage of semiconductors. Elsewhere for corporate Japan, order trends and capital expenditure plans continue to look strong.

Asia (ex Japan)

Asia ex Japan equities recorded a sharply negative return in the third quarter, largely driven by a significant sell off in China. This was partially due to concerns over the ability of property group Evergrande to service its debts. The Evergrande situation sparked global investor concerns over potential spill over risks.

Market concerns over inflation and the outlook for interest rates also dampened investor confidence during the quarter. China was the worst-performing index market, with sentiment towards the country also weakened by the government’s regulatory crackdown affecting the education and technology sectors. Power outages in China and the rationing of energy also spooked investors, hurting production of key commodities. The downside risks in China have significantly increased against a backdrop of slowing economic activity and concerns that recent regulatory policies will further weigh on growth.

Pakistan was also sharply weaker as ongoing political upheaval in neighbouring Afghanistan weakened investor sentiment towards the country, with fears that violence and unrest could spill over into Pakistan. Hong Kong and South Korea followed China lower, with both markets sharply lower as market jitters over China spilled out into the wider region.

India was the best-performing index market during the quarter and achieved a strongly positive performance as accommodative monetary policy and the easing of Covid-19 restrictions boosted investor sentiment. Indonesia also achieved a positive return. Singapore was almost unchanged, while declines in Taiwan and the Philippines were modest compared with the falls seen in other index markets.

Emerging markets

Emerging market (EM) equities declined in Q3, which saw a sell-off in Chinese stocks, concern over continued supply chain disruptions, and worries over the implications of higher food and energy prices for some markets. US bond yields rose towards the end of the quarter. Regulatory actions in China were the initial trigger for market weakness. These were compounded by the re-imposition of some Covid-19 restrictions and supply chain disruption in August, worries about possible systemic financial system risks stemming from the potential collapse of Evergrande, and power shortages.

Brazil was the weakest market in the MSCI EM index as above-target inflation continued to rise and the central bank responded with further interest rate hikes. Meanwhile Q2 GDP growth disappointed, developments in China weighed on industrial metals prices, and political rhetoric picked up ahead of next year’s presidential election. South Korea also posted a double-digit fall amid falling prices of dynamic random access memory chips (DRAM) price and concerns over the impact of power issues in China on production and supply chains. Weaker industrial metals prices also weighed on performance of net exporter markets Peru and Chile.

By contrast, net energy exporters in general outperformed, most notably Colombia, Russia, Kuwait, Saudi Arabia, Qatar and the UAE. India delivered a strong gain, with sentiment boosted in part by the recent stream of initial public offerings. The economy continued to recover while vaccinations picked up – India is now on track to deliver at least one dose to 70% of its population by November.

Global Bonds 

US and European government yields were unchanged for the quarter as an initial decline reversed in September amid a hawkish shift from central banks and continuing inflationary pressure. The UK underperformed, with a significant rise in yields on increased expectations for monetary policy tightening.

The US 10-year Treasury yield finished at 1.49%, one basis point (bps) higher. Yields fell initially, as the rapid economic recovery appeared to be moderating. However, as the market’s focus turned to rising inflation and the prospect of the withdrawal of monetary policy support, yields rose back to similar levels seen at the beginning of the quarter. The Federal Reserve (Fed) became increasingly hawkish, suggesting that asset purchase tapering could start as early as November and that it could be wound up by mid-2022, earlier than expected.

The UK 10-year yield increased from 0.72% to 1.02%, with the move occurring in September. As with the Fed, there was evidence of a marked hawkish shift among Bank of England (BoE) policymakers, with a suggestion that rate rises might be warranted before the end of the year. Recent economic indicators came out worse than expected, while year-on-year consumer price inflation rose to 3.2% in August, the highest since 2012.

In Europe, the German 10-year yield was one basis point (bps) lower at -0.19%. Italy’s 10-year yield finished 4bps higher at 0.86%. Economic activity continued at a robust pace, the region benefiting from the release of pent-up demand, having come out of lockdowns relatively late. Eurozone inflation hit a decade high of 3.4% year-on-year in August.

Among corporate bonds, high yield made positive returns, while investment grade credit was little changed. European investment grade outperformed government bonds, while the US market was in line with Treasuries. 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 government bond yields rose, particularly in September, though EM corporate bonds made a small positive return. Emerging market currencies broadly fell against the US dollar.

Over the quarter, convertible bonds could not benefit from the early tailwind provided by positive equity markets but provided some protection in September as equities declined. The Refinitiv Global Focus index, which measures balanced convertible bonds, shed -2.1% for the quarter. The valuation of convertibles cheapened slightly as a result of strong primary market activity. More than $25 billion of new convertible bonds were launched in the quarter.


The S&P GSCI Index recorded a positive return in the third quarter, driven by sharply higher energy prices caused by increased demand in the wholesale gas market. Energy was the best-performing component in the quarter, with all subsectors achieving a positive result. The price of natural gas was significantly higher in the quarter, closely followed by gains in the prices of gas oil and heating oil. Unleaded gasoline also gained strongly on stronger demand as consumers started to return to normal consumption patterns after the Covid-19 crisis.

The industrial metals component was modestly higher, with a sharp rise in the price of aluminium offsetting price declines for lead, copper and nickel. The price of zinc was almost unchanged. The precious metals component also declined, with the price of silver sharply lower. The price of gold was also lower, but the decline was more modest.

The livestock component also declined. The agriculture component reported a small decline in the quarter, with sharp declines in the prices of corn and soybeans offsetting higher prices for cotton, cocoa, Kansas wheat, coffee and sugar.

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 – May 2021

A look back at markets in May when shares moved up on re-opening and vaccine optimism, although rising inflation sparked some concerns.

  • Developed market equities gained in May with the ongoing vaccine roll-outs and fiscal stimulus measures helping to offset concerns about rising inflation. Emerging market shares also advanced, aided by US dollar weakness.
  • Government bond yields were little changed in May. US investment grade corporate bonds produced a solid total return and continued outperforming Treasuries.
  • Commodities gained, with precious metals 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 equities rose in May. Economic momentum showed further signs of acceleration as industries reopened and vaccine roll-outs continued, which lifted investor spirits.

The composite purchasing managers’ index (PMI) rose to 63.5 in April, indicating significant expansion. Driven by the services component, this suggests the services recovery is now underway. The PMI is an index of business activity based on a survey of private companies in the manufacturing and services sectors. A reading above 50 means the economy is expanding.

Headline consumer price inflation rose 4.2% year-on-year (y/y) in April, the highest level since September 2008 and sparked some nascent concern it could prompt tighter monetary policy. Federal Reserve (Fed) officials have indicated cautious optimism about the recovery, with some members being open to discussing tapering “at some point in the upcoming meetings”, if the economy continued to make rapid progress.

A blot on the otherwise bright landscape, non-farms payrolls added just 266,000 jobs last month compared with economists’ expectations of almost one million positions created over the month. While leisure and hospitality added 331,000 jobs, there were losses in other sectors of the economy, including car manufacturing, temporary help and retail. Moreover the unemployment rate edged up to 6.1%. Car manufacturing has been hit recently by disrupted supply chains.

Corporate earnings reflected the economic vigour, with Q1 earnings on track to be the strongest in over a decade. The strongest performance was by equities sectors closely tied to economic growth such as energy and materials, which performed well. Consumer discretionary lagged, partly as a shortage of semiconductors has caused shutdowns in auto production.


Eurozone shares posted another advance in May and outperformed other regions. The vaccine roll-out continued to pick up the pace in several countries. As of 31 May, 43% of the German population had received at least one vaccine dose with France and Italy on 38%, according to Our World In Data.

Restrictions on social and economic activity were generally loosened further. This resulted in greater optimism over the economic and business outlook for the rest of the year. The energy, financials, consumer staples and discretionary sectors led the advance while healthcare, information technology and utilities were laggards.

Shares were further supported by an exceptionally strong corporate earnings season, even accounting for the soft comparison with Q1 2020. Sectors that are sensitive to the economic cycle fared well in terms of earnings, benefiting from a combination of demand recovery, pricing power and supply constraints.

Forward-looking data continued to be very encouraging. The flash composite PMI rose to 56.9, a 39-month high, with the services component rising strongly as easing Covid restrictions helped fuel higher demand. Despite the improving economic outlook, European Central Bank (ECB) policymakers signalled that it is too soon to withdraw stimulus measures. Annual inflation was confirmed at 1.6% for April although this rose to 2.0% for May.


UK equities rose over the month with a number of domestically focused sectors performing well as confidence grew around the re-opening of the economy.

The government pushed ahead with the latest easing of lockdown measures amid a rise in infections related to the ‘Indian’ variant of Covid-19. Concerns as to whether the variant might delay the removal of social distancing laws on 21 June did result in some domestically focused sectors giving back some of their recent very strong gains. However, in general, the outlook for UK consumers and businesses improved, resulting in various forecasters upgrading GDP predictions.

The Bank England announced plans to slow its quantitative easing programme. Investors were preoccupied by the potential implications should the current pick-up in inflation, from a very low base in 2020, be sustained. It was against this backdrop that the domestically focused banks and life insurance companies outperformed the overall market.

In contrast, large internationally diversified financials were negatively impacted by sterling strength and a weak US dollar in particular. Likewise, the lowly valued internationally diversified resources companies underperformed. Fears over currency impacts on their dollar earnings outweighed the ongoing strength in crude oil and industrial metal markets. The utilities sector performed very well amid rising wholesale electricity prices, in an otherwise mixed month for less economically sensitive, or defensive areas of the market. Merger and acquisition activity reaccelerated with a number of new deals announced.


After a sharp decline in the second week of May, the Japanese stock market subsequently recovered as global inflation fears receded to close up 1.4% for the month. The yen weakened slightly against the US dollar which provided some support for equity market sentiment. 

Although the rate of Covid infections in Japan remains markedly below most other countries, the persistent increase in cases led the government to extend the state of emergency throughout May in several areas, including Tokyo. This, together with slow progress in the vaccine roll-out, further damaged the credibility of the Suga administration. Although we could still see additional restrictions imposed, the political timing is now complicated leading into the start of the Olympics in late July. Towards the end of May we have seen a substantial acceleration in the vaccination rate as several mass vaccination centres finally started operation.

Consumer sentiment has inevitably been impacted by the latest restrictions imposed under the state of emergency. However, real-time data suggests the real effects may be slightly milder than those seen in previous periods of restriction.

The corporate results season was completed in May with the majority of companies reporting numbers in line with, or slightly ahead of, consensus expectations. The number of companies reporting profits below expectations has been significantly lower than normal in each of the last two quarterly earnings seasons. This positive skew in results is mainly due to successful programmes of cost control across multiple market sectors. Meanwhile, the ongoing global recovery is continuing to support industrial production.

Asia (ex Japan)

Asia ex Japan equities recorded a modest gain in May. Although shares were weaker earlier in the month, on the back of higher-than-expected US inflation data, equities recovered later in the month, driven by a weaker US dollar.

India was the strongest market in the MSCI AC Asia ex Japan index. This strong performance came despite the country grappling with rising numbers of Covid-19 infections and India remains one of the countries worst-hit by the pandemic. The Philippines and Pakistan also achieved strong gains in the month and outperformed the index. Gains achieved by China, Hong Kong and South Korea were more modest. In China, the slow roll-out of Covid-19 vaccines and regulatory concerns over the country’s technology sector held back market returns.

Increasing Covid-19 infections in a number of countries weighed on returns in a number of markets in the index, with Malaysia, Singapore and Thailand all ending the month in negative territory. Shares in Taiwan also declined in May, as a rise in Covid-19 infections prompted the imposition of tighter restrictions. By sector, energy, utilities and healthcare were the strongest, achieving solid gains in May. Conversely, consumer discretionary, communication services and information technology were all weaker, ending the month in negative territory.

Emerging markets

Emerging market (EM) equities generated a positive return amid ongoing signs of global economic recovery and the transition out of the pandemic. US dollar weakness was beneficial. The gains came despite a sell-off early in the month, as a higher-than-expected US inflation reading renewed concerns over the timing of global monetary policy tightening.

The euro-linked economies of Hungary, Poland, and the Czech Republic were among the best performing markets. Stronger commodity prices were supportive of a number of EM including Peru, Russia, Brazil and South Africa. India also outperformed the MSCI EM index amid signs that the current wave of Covid-19 may be peaking. By contrast, Chile registered a negative return as policy uncertainty increased. Egypt also finished in negative territory, as did Taiwan which saw an outbreak of coronavirus cases. China, where the government announced new regulations for the technology sector, and South Korea also posted slightly negative returns and underperformed the index.

Global Bonds 

Government bond yields were little changed in May, consolidating having sold-off since the start of the year. The US 10-year Treasury yield was three basis points (bps) lower at 1.59%, and the UK’s 10-year fell 5bps to 0.80%, both having risen significantly year to date.

Bond yields rose earlier in the month, as data showed headline US consumer price inflation rose 4.2% year on year in April. US core personal consumption expenditure, which excludes food and energy, rose 3%, the largest increase since 2006.

European yields continued to rise initially, with the vaccine roll-out and economic recovery gaining traction, then fell in the last week of May on dovish comments from the ECB.

The 10-year Bund yield increased by 2bps to -0.19%, reaching an intra-month high of -0.11%. Italy’s and Spain’s finished unchanged, at 0.91% and 0.46% respectively, after declines of 12 and 8bps in the final week.

US investment grade (IG) corporate bonds produced a solid total return and continued outperforming Treasuries. European IG was marginally weaker, in line with government bonds. High yield corporate bonds saw further positive returns, but due to income. 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 bonds made positive returns, ahead of developed markets, led again by high yield. Commodities prices continued to rise. Emerging market currencies broadly performed well as the US dollar weakened. 

Despite the tailwind of positive equity markets, the convertible bonds universe came under pressure in May. Information technology, disruptive consumer names, and the “Covid winners” in general ended the month with a loss. The Refinitiv Global Focus index, which measures balanced convertible bonds, shed -0.7%.


The S&P GSCI Index recorded a modestly positive return in May, reflecting how the economic rebound in the world’s largest economies is bolstering demand for metals, food and energy while supplies remain constrained. The increase in May was more muted than in recent months on growing concerns over inflation. Precious metals was the best performing component of the index, with strong gains for both gold and silver. Industrial metals also achieved a good performance in May, led by gains for zinc and copper.

The energy component was also higher in the month, led higher by heating oil and gasoil. Crude oil and Brent Crude also gained during the month, reflecting how countries around the world are starting to return to normal patterns of consumption. In the livestock sector, prices for feeder cattle and lean hogs gained while prices for live cattle were modestly lower in the month. The agriculture sector recorded a negative performance over the month, led by sharp declines in wheat and Kansas wheat. Cotton was also lower in the month, while coffee recorded a strong gain.

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 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 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 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.


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.


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.