July 2015

• Global markets were volatile in July 2015 as China's equity market correction, uncertainty over Greece and continued weakness in commodity prices unsettled investors.
• European markets recovered after Greece reached a new agreement with its creditors, reducing fears of an immediate exit from the eurozone.
• U.S. equities were broadly flat as strong domestic fundamentals were offset by mixed corporate earnings and expectations of Federal Reserve policy tightening.
• Chinese authorities introduced a wide range of support measures to stabilise local equity markets after a sharp decline.
• Emerging markets came under pressure from falling commodity prices and a strengthening U.S. dollar.
• Commodity markets weakened further, with oil and industrial metals declining amid persistent concerns over global oversupply and slower demand growth.

Asia (ex. Japan)

Asian markets outside Japan experienced heightened volatility during July, driven primarily by the sharp correction in Chinese equities. After an extraordinary rally in the first half of the year, mainland Chinese stocks fell significantly despite aggressive intervention by regulators, including trading suspensions, restrictions on short selling and direct purchases by state-backed entities.

Although these measures helped stabilise sentiment toward month-end, concerns over China's economic slowdown and financial market excesses weighed on regional confidence. India remained comparatively resilient due to supportive domestic fundamentals, while export-oriented markets such as South Korea and Taiwan were affected by weaker global trade and ongoing currency fluctuations.

Europe

European markets experienced significant volatility as Greece and its creditors negotiated a new bailout agreement following a referendum that rejected earlier terms. After intense negotiations, an agreement was reached that kept Greece within the eurozone and reduced the immediate risk of broader financial disruption.

Investor sentiment improved as the European Central Bank continued its quantitative easing programme and economic indicators pointed to gradual recovery. The weaker euro and low interest rates remained supportive for exporters and corporate earnings, helping offset lingering political uncertainty.

United States

U.S. equities were little changed in July as strong labour market conditions and steady consumer spending were balanced by mixed corporate earnings and lower commodity prices. The domestic economy continued to expand, supported by healthy household balance sheets and improving housing activity.

The Federal Reserve maintained its view that interest rates could rise later in 2015, provided economic conditions remained favourable. Treasury yields were relatively stable, while the U.S. dollar remained firm against most major currencies, creating headwinds for multinational companies and commodity markets.

United Kingdom

UK equities declined modestly in July as weakness in mining and energy shares offset generally positive domestic economic conditions. Employment and wage growth remained supportive, while low inflation continued to boost real household incomes.

The Bank of England left policy unchanged, though some policymakers began signalling that interest rate increases could be approaching. Sterling strengthened against the euro but remained sensitive to global market developments. Gilt yields were broadly stable as investors balanced domestic growth with subdued inflation.

Japan

Japanese equities advanced during July, supported by continued monetary stimulus, improving corporate earnings and ongoing governance reforms. The weaker yen enhanced the competitiveness of exporters, while shareholder-friendly measures such as increased dividends and share buybacks attracted investor interest.

Economic data remained mixed, but business sentiment and profitability stayed favourable. Domestic pension funds continued to increase allocations to equities, providing a structural source of support to the market.

Emerging Markets

Emerging market assets came under pressure in July as weaker commodity prices, concerns over China and expectations of U.S. policy tightening weighed on sentiment. Commodity exporters were particularly affected, while countries with more stable macroeconomic conditions and lower inflation performed comparatively better.

Brazil and several other Latin American markets struggled amid recession concerns and political uncertainty. India remained more resilient, supported by reform expectations and improving domestic fundamentals, although broader risk aversion limited gains.

Commodities

Commodity prices declined further in July, with crude oil resuming its downward trend as oversupply persisted and markets anticipated increased Iranian exports following the nuclear agreement reached with world powers. Brent crude fell sharply as inventories remained elevated and demand growth expectations softened.

Industrial metals, including copper and aluminium, weakened on concerns about slowing Chinese demand. Gold prices also fell, pressured by the stronger U.S. dollar and expectations that the Federal Reserve would begin raising interest rates later in the year.