South African equities returned to positive territory in July, ending a two-month losing streak as gains in resources, rand-hedge counters and investment holding companies offset weakness in domestically focused consumer shares. The FTSE/JSE All Share Index advanced +1.1% MoM, outperforming the FTSE/JSE All Bond Index, which declined -1.4% MoM. South African listed property was once again the best-performing local asset class, gaining +1.9% MoM. Resources rose +2.2% MoM, supported by a rebound in platinum miners and strength in diversified mining and energy shares, while financials gained +1.2% MoM and industrials delivered a more modest +0.3% MoM return. In US dollar terms, MSCI South Africa fell -0.3% MoM, underperforming MSCI World (+0.5% MoM) but outperforming MSCI Emerging Markets (-3.3% MoM), as the rand weakened -0.9% MoM against the US dollar.
South Africa’s macroeconomic backdrop became more challenging in July as inflation continued to rise and the South African Reserve Bank surprised markets by leaving interest rates unchanged. Headline inflation accelerated to 5.0% YoY in June from 4.5% previously, with fuel and insurance costs among the main contributors. Despite these pressures, the SARB voted 4 – 2 to keep the repo rate unchanged at 7.0%, defying expectations for a 25-basis-point increase. The unexpectedly dovish decision placed pressure on local assets, with the rand weakening by approximately 0.9% MoM and pushing the 10-year government bond yield above 8.8%. Fiscal developments were more encouraging, with government revenue collections through June tracking comfortably ahead of National Treasury’s projections, providing a more supportive backdrop for the fiscal outlook. Nevertheless, persistent core inflation, elevated oil prices and uncertainty ahead of municipal elections suggest that domestic interest rates may need to remain higher for longer.
Global equity markets delivered a modest positive return in July, although the subdued headline performance concealed considerable volatility beneath the surface. The MSCI World Index gained +0.5% MoM, as strength in energy, financials and selected value-oriented sectors offset a sharp correction in semiconductor and AI-related shares. The month was shaped by two competing forces. Renewed escalation in the US-Iran conflict disrupted shipping through the Strait of Hormuz and drove Brent crude oil sharply higher, while investors simultaneously reassessed the sustainability of the AI capital expenditure cycle and the elevated valuations attached to many technology beneficiaries. Semiconductor shares, which had led global markets during the first half of the year, sold off heavily amid concerns around future returns, export restrictions and China’s growing technological capabilities. Forced deleveraging by highly leveraged investors amplified the decline before sentiment stabilised towards month-end. Commodity markets were mixed: Brent crude rose approximately +23.6% MoM, while gold posted only modest gains of +1% MoM and platinum group metals recovered from their June lows to rise +6.2% MoM.
US equity markets were mixed in July despite another strong corporate earnings season. The S&P 500 was broadly unchanged, declining -0.1% MoM, while the Nasdaq 100 fell -6.6% MoM as semiconductor weakness and renewed concerns around technology valuations weighed on the index. The Dow Jones Industrial Average gained +0.3% MoM, supported by energy, financial and other value-oriented sectors. Second-quarter earnings remained robust, with approximately 85% of reporting S&P 500 companies exceeding analyst expectations and aggregate earnings growing strongly. However, investors increasingly demanded evidence that elevated AI-related capital expenditure would translate into sustainable returns, rather than rewarding spending alone. Large technology companies with accelerating cloud revenues were treated more favourably, while companies raising capital expenditure guidance without a commensurate improvement in earnings expectations faced greater scrutiny. On the policy front, the Federal Reserve kept rates unchanged in a 9–3 vote as Chair Kevin Warsh reiterated the committee’s commitment to restoring price stability. Headline inflation slowed to 3.5% YoY in June, while core inflation also dropped to 2.6% YoY in June 2026. US Treasury yields rose sharply, with the 10-year yield ending the month near 4.74%, while the US Dollar Index declined -1.3% MoM.
European equity markets delivered modest gains in July as resilient earnings and easing inflation helped offset renewed energy-price volatility and hawkish central-bank guidance. The MSCI Europe ex-UK Index rose +0.9% MoM, while France’s CAC advanced +1.3% MoM and Germany’s DAX gained +2.5% MoM. Eurozone inflation ticked up slightly to 2.9% YoY in July from 2.8% YoY in June as elevated oil prices remained a risk to the outlook. The UK was one of the strongest developed markets during the month, with the FTSE 100 rising +3.5% MoM and reaching a new record high. Its relatively low exposure to technology and greater weighting towards energy and financial shares proved beneficial during the global semiconductor sell-off. UK inflation eased to 2.6% YoY, while the Bank of England kept its policy rate unchanged at 3.75%. Political uncertainty also diminished as Andy Burnham assumed office as Prime Minister following Keir Starmer’s resignation in June.
Emerging market equities came under pressure in July as the sharp reversal in semiconductor shares weighed heavily on technology-oriented Asian markets. The MSCI Emerging Markets Index declined -3.3% MoM, with South Korea and Taiwan among the largest detractors as leading chipmakers experienced steep losses. Emerging markets remain particularly exposed to the semiconductor manufacturing supply chain, leaving the asset class vulnerable to shifts in sentiment towards AI infrastructure spending. China, however, moved in the opposite direction. Hong Kong listed Chinese equities rallied strongly as policymakers announced a range of stimulus measures, mobilised state-linked institutions to support markets and introduced further monetary easing. The Hang Seng rose +13.2% MoM, supported by a rebound in Chinese technology shares, while the Shanghai Composite declined -6.4% MoM as domestic growth concerns persisted. China’s official manufacturing PMI fell to 49.2 and non-manufacturing PMI declined to 49.0, signalling contraction in both sectors. The divergence highlighted the extent to which policy support and market flows temporarily outweighed a still-fragile underlying economic backdrop.
The hedge fund returned to positive territory in July, as gains from both the long and short books contributed positively to returns. Performance on the long side was driven primarily by positions in European banks (Piraeus Financial Holdings, ING Group and Alpha Bank), which benefited from continued strength in the European banking sector, supported by resilient earnings, robust capital generation and improving shareholder returns. Technology stocks (Tencent and Microsoft) also contributed strongly as improving sentiment towards global technology companies and Microsoft’s earnings-driven rally over the final two trading days of the month lifted the sector. These gains were partially offset by weaker performance from AVI and Raubex, reflecting ongoing pressure on domestic consumer-facing businesses and profit-taking in construction shares. Within the short book, gains were generated from the fund’s Nasdaq index protection, while modest losses stemmed from selected positions in the tobacco and South African listed property sectors.