The Stoxx 600 rose by 3.7% in July (total returns, Euro terms) as markets across the globe bounced back from the initial post-BREXIT fallout. In fact the majority of equity markets either made it back to or above pre-BREXIT levels with the exception of European banks, where Italy's NPLs and general profitability concerns remained at the forefront.
Much of the general rebound can be attributed to the renewed hopes of central bank policy remaining accommodative. In the case of the BoE and ECB, expectations are high for further easing despite remaining on the sidelines in July and instead waiting for the post-BREXIT data. Government bond yields remained historically low throughout July, with the US, the UK as well as the German 10-year yields hitting all time lows, while in the commodity space Brent crude fell sharply in July, entering a bear market after having falling 20% since June 9.
In local currency terms, the monthly performance of European equities was majorly driven by the Euro bloc (5.1%), which while outperforming the US (3.7%), fell short of Japanese equities (6.4%), as the latter was particularly helped by expectations of helicopter money alongside fiscal stimulus measures. Within Europe, all major countries posted positive returns with Ireland being the sole exception (-0.9%). UK equities rose by 3.7% on the back of the improvement in global risk appetite and hopes that the near-term negative UK growth impact from the referendum might be limited. The best performing countries for the month of July were Austria (7.5%), Germany (6.8%) and Greece (5.8%).
The Austrian stock market benefitet from the cyclical bounce after the BREXIT. The strongest performers have been Zumtobel (+24,66%), FACC (+20,48%), Erste Group (+16,72%), Lenzing (+12,94%) and CA Immobilien (+11,9%). On the negative side, DO&CO suffered the biggest drop of 10,57% as a result of the potential implications of the failed political coup attempt on 15th of July 2016 in Turkey and its potential implications for economy and DO&CO business. In addition, OMV was the second largest negative performer in July after the recent fall in the oil price.
Senior Portfolio Manager – Equities
European Equities & Country Strategies
Pioneer Investments Austria GmbH
Member of the Board of ÖVFA
3 August 2016
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