Monthly Highlights:
- Global markets softened in July as weakness in US technology shares weighed on investor sentiment, while renewed geopolitical tensions and higher oil prices added to inflation concerns. Despite the more cautious backdrop, resilient economic conditions continued to support broader equity markets outside the US. Government bond yields also rose as markets reassessed the interest rate outlook, weighing on fixed interest returns.
- Australian shares moved firmly higher, led by financials and energy. Improving investor confidence supported the banking sector, while higher oil prices lifted energy companies. Healthcare also contributed, whereas technology, industrials and materials weighed on returns. Smaller companies lagged their larger peers, highlighting the relatively narrow nature of the market advance.
- International share markets eased, although performance varied across regions and sectors. The US edged lower as technology shares gave back some recent gains, while Europe and Japan posted modest gains. China rebounded strongly after an extended period of weakness, partly offsetting broader weakness across emerging markets. A firmer Australian dollar further reduced returns from unhedged overseas investments for Australian investors.
- Australian and global fixed interest markets declined modestly as government bond yields rose in response to persistent inflation concerns and changing interest rate expectations. Higher yields weighed on government bond returns, while credit, or corporate bonds, were mixed. Australian credit proved relatively resilient, while global credit weakened modestly as credit spreads widened, meaning investors demanded greater returns to hold corporate bonds over government bonds.
