iShares July Market Recap

• Global share markets recorded mixed performance in July following the sharp recovery in share prices in the previous three months. The COVID-19 pandemic continued to present medical and human challenges globally as the number of confirmed cases passed 18 million and coronavirus-related deaths approached 700,000 at July month-end. Economic indicators generally improved in July, supporting the notion that the worst of the economic contraction is behind us. The uncertainty in activity resumption has led to wide variations in economic growth forecasts and corporate earnings guidance. In addition, investors are confronted with amplified geopolitical tension, ballooning government debt levels, high unemployment globally and concerns of a fiscal cliff if government support ends prematurely.

• US equities were amongst the best performers in July, with the S&P500 index gaining 5.6%. Several large US companies releasedtheir quarterly earnings results over the month. Corporate earnings were generally somewhat better than the low expectations held by many investors –with industrials and tech leading the way. Positive earnings releases by US tech heavyweights, Apple, Amazon, Facebook and Google were particularly noteworthy, which pushed the overall index higher.

• Macro data confirmed that the US economy entered a recession earlier this year, but faster-moving metrics signalled that the fall in economic activity has bottomed. The US economy suffered its largest fall since the Great Depression in the second quarter of 2020, with GDP collapsing 32.9% (annualised) over the quarter. The US Federal Reserve Bank (‘Fed’) continued to keep interest ratesclose to zero and pledged to ‘do whatever it takes’ to support the domestic economy.

• European equity markets generally declined in July, after rallying strongly in the previous three months. A sharp appreciation in the Euro weighed on European exporters. EU leaders reached an agreement on a €1.07 trillion seven-year budget as well as a €750 billion European Recovery Fund that provides support for fiscal spending and structural reform. This is the largest fiscal package inthe history of the European Union and it is going to provide material fiscal support to European economies in the coming years. The allocation of support is targeted towards European countries that are most affected by the COVID-19 shock, with Italy and Spain set to benefit most.

• Asian equity markets recorded mixed performance in July. Share markets in Japan and Hong Kong declined, while equities in China and Taiwan gained. The Chinese economy continued to show signs of recovery, with several economic activity indicators (services and manufacturing) beating expectations.

• In Australia, the S&P/ASX 300 Accumulation Index gained 0.6% over the month of July but remained in negative territory on a year-to-date basis. Half of Australia’s 22 sub-industry sectors gained while the other half lost. Consumer durables & apparel (+14%) andMaterials (+6%) were the best performers in July, while Household & personal products (-10%) declined the most.

• Government bond indices recorded slightly positive performance in July as sovereign bond yields continued to trade in a range-bound fashion. 10-year government bond yields in the US and Australia finished the month slightly lower at 0.53% (down 13 bps) and 0.82% (down 6 bps), respectively. It should be noted that government bond yields remain near their all-time lows following the risk-off rally in the first quarter of the year. While government bond yields were stable, credit spreads continued to tighten significantly from their crisis highs –leading to meaningful positive returns from credit and high yield markets. Emerging Market debt also recorded positive performance due to significant spread tightening.

• Commodity markets recorded broadly positive performance over the month with base metals and iron ore were amongst the best performers. Gold and other precious metals continued to gain and indices tracking these precious metals saw significant inflows over the month. Oil prices also gained in July but remained below levels seen early in the year.

• Currency markets also exhibited significant moves in July. The Euro appreciated 2.6% on a trade-weighted basis and hit a two-year high against the US dollar. A weaker USD contributed to the strong move but political developments in the Eurozone also helped. EU leaders agreed on a massive seven-year budget as well as a €750 billion European Recovery Fund. The deal is seen as a significant step towards European fiscal solidarity. The Australian dollar strengthened meaningfully both against the US dollar and on a trade-weighted basis (and broke above the psychological 0.70 US cent level in July).

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