Market Update July 2020

Global equity markets were volatile in July but overall continued to recover from March lows as market participants focused on sustained central bank support and vaccine developments.

The value of the Australian Dollar broadly increased against major currencies, somewhat dampening the returns of overseas investments when measured in Australian dollar terms. Global investment grade credit spreads continued to contract over the month (i.e. the market’s perceived riskiness of lending to high quality companies decreased).

The Australian Government announced extensions to their flagship coronavirus support programs in July. The JobKeeper program has been extended to 28 March 2021 with payments of $1,500 per fortnight being reduced in phases on 28 September to $1,200 (for the top rate) and 4 January 2021 to $1,000 (for the top rate).  Lower payment rates will apply for employees and business participants that work fewer than 20 hours per week in the relevant period. The coronavirus supplement for eligible income support recipients such as those receiving JobSeeker payments will be extended to 31 December 2020 with the current rate of $550 per fortnight reducing to $250 on 25 September. Inflation statistics were published for the April-June quarter in July, with the Consumer Price Index (CPI) falling 1.9%, the largest quarterly fall in published history (going back to 1948). Government funding of childcare contributed significantly to the deflationary quarter with reduced overall demand also acting to pull prices down. The unemployment rate in Australia hit 7.4% in July, the highest reported value since 1998.

The United States reported the largest GDP contraction in the modern era of GDP measurement (going back to 1947) on both a quarterly and annual basis. Real GDP for the United States fell 32.9% (on an annualised basis) in the April-June quarter and 9.5% for the 2020 financial year. There are less than 100 days before the 2020 Presidential election between the incumbent Donald Trump and presumptive democratic nominee Joe Biden. Polling throughout July has shown Biden to be a substantial favourite, leading by approximately ten percentage points in an average of polls. President Trump continues to lose approval on the Administration’s handling of the coronavirus. Congress is divided on the size and style of a Stage 4 stimulus package. A second round of Economic Impact Payments appears to be gaining bipartisan support in the United States, however, unemployment benefits are being hotly contested. Supplemental unemployment benefits expired on 31st July and the eviction/foreclosure moratorium expired on 24th July leaving millions of Americans potentially exposed. Congress has postponed its typical August recess until a stimulus package is passed.

Tensions continued to rise in July between the United States and China, with the United States looking to impose sanctions on China for the security reforms recently enacted in Hong Kong. On 24 July, the United States forced closure of the Chinese consulate in Houston, accusing the Chinese of engaging in systematic economic espionage and stealing vaccine intelligence. Verbal responses on both sides escalated and China retaliated by closing the United States consulate in Chengdu (Sichuan).

On 22 July, the European Council agreed on a momentous stimulus package after one of the longest summits in history. The result comprised of two main packages, one being a budget increase of €1.3tn and the other a one-off “Next Generation” stimulus package of €750bn to help countries recover from the Covid-19 recession. The €750bn is made up of a combination of €390bn worth of grants and €360bn worth of loans to be split primarily among the hardest hit members of the European Union. The majority of the funds, however, will not become available until 2021 and 2022.


Reported global coronavirus case numbers were slightly shy of 18 million at the end of July, with a total of over 680,000 fatalities. Daily reported cases of infected people continued to climb with a peak close to 300,000 people per day. Five of the top six countries in terms of total reported infected coronavirus cases saw their daily infection rates reach new heights, including the United States, Brazil and India. As governments attempt to mitigate the economic impacts of lockdown by easing restrictions the coronavirus continues to spread throughout the globe.

There appears to have been progress in developing a vaccine for COVID-19 in July, with six candidate vaccines reaching Phase 3 trials consisting of human testing on thousands of volunteers. Moderna were the first to start human trials in March and have produced promising results by getting patients to produce viral proteins to combat the coronavirus. A collaboration between BioNTech (German), Pfizer (United States) and Fosun Pharma (Chinese) is conducting simultaneous Phase 2 and Phase 3 trials together in a similar approach to Moderna. Other pathways being explored include using a virus to deliver coronavirus genes into cells to provoke an immune response by AstraZeneca and Oxford University, using weakened/inactive versions of coronavirus to produce an immune response by Sinopharm and Sinovac, and repurposing previously approved vaccines such as the BCG vaccine for tuberculosis by the Murdoch Children’s Research Institute [1].

Australia experienced a significant rise in cases in July, predominantly in the state of Victoria, and surpassed 200 casualties nationwide. The Victorian State Government continued to build on measures taken in June, imposing Stage 3 lockdown restrictions on the broader metropolitan Melbourne area and Mitchell Shire municipality from midnight on the 8th of July for six weeks. In a major recent development, the Premier of Victoria, Daniel Andrews, declared a State of Disaster effective from 6:00pm on Sunday the 2nd of August. This accompanied Stage 4 restrictions being enforced on the Melbourne metropolitan area which include: curfew for citizens from 8pm – 5am each day, a requirement to remain within a 5km radius from home for shopping or exercise, only one person per household per day can leave home to get necessary goods and services, and outdoor exercise is restricted to 1 hour per day. The following day Mr Andrews announced restrictions on business operations becoming effective from the 5th of August. Essential businesses such as supermarkets/grocery store, bottle shops, petrol stations, pharmacies, post offices, and certain medical facilities will remain open as usual, however, businesses that were previously classed as essential such as meat works, and construction now face restrictions. From mid-July face covering became compulsory when leaving the house, with exemptions for those with medical conditions or children under 12 years of age. The Victorian and New South Wales border closed from the 8th of July for the first time in 100 years and the Queensland border has steadily increased restrictions with people entering from New South Wales. 


Foreign equity markets were volatile throughout July. Developed markets (excluding Australia) returned 3.3% on a currency-hedged basis (and 0.6% in Australian dollar terms), significantly underperforming emerging markets (for the second consecutive month) which returned 8.1% in local currency terms. The best international performer was the United States S&P 500 Index which returned 5.6% for the month.

The Australian stock market generated a return of 0.5% during July, with 5 out of 11 sectors contributing positively, 2 performing on par and 4 producing negative returns. Materials, Information Technology and Communication Services were the best performing sectors returning 5.8%, 4.6% and 3.4% respectively. Energy, Health Care and Industrials decreased the most, by 6.6%, 3.9% and 3.7% respectively.

From a developed market sectoral perspective 10 out of 11 sectors produced positive returns. Consumer Discretionary, Communication Services and Information Technology were the best performing sectors, returning 5.9%, 5.4% and 5.3% respectively in local currency terms. Energy was the sole sector to produce a negative return returning -5.7%.


The Australian government bond yield curve flattened somewhat over July with the two-year yield increasing by 0.017% and the ten-year yield decreasing by 0.055%.

Major global ten-year government bond yields decreased throughout July with the exception of China (which increased by 0.125%). Two-year global bonds were more mixed and broadly unchanged, again with the exception of China that saw an increase of 0.173% over the shorter duration. 


The Australian dollar was mixed against major currencies over the month due in part to the growing dispersion of coronavirus outcomes throughout the developed world. The AUD increased by 3.5%, 2.5% and 1.5% against the United States Dollar, Chinese Renminbi and Japanese Yen respectively, whilst falling against the European Euro and the British Pound.

The Australian Dollar finished the month at 0.7143 US Dollars, up 2.4 US cents over the month.


The price of crude oil was less volatile in July compared with previous months. WTI rose 2.5% and the price of Brent crude oil increased 5.2% due to continued subdued global output. Industrial metal prices increased 6.9% on average, with iron ore being the top performer, increasing 11.5%. The precious metals performed particularly well with the price of silver increasing a staggering 34.0% and gold returned 10.9% for the month.

Performance of key markets

Asset class Index Month (% change) FYTD (% change) 1 year (% change)
Australian Shares S&P/ASX 200 Acc. Index 0.5% 0.5% -9.9%
International Shares MSCI World Ex Aust Unhedged A$ 0.6% 0.6% 3.4%
International Shares MSCI World Ex Aust Hedged A$ 3.3% 3.3% 3.5%
US Shares S&P 500 Index 5.6% 5.6% 12.0%
UK Shares FTSE 100 Index -4.2% -4.2% -19.2%
Japanese Shares Nikkei 225 Index -2.6% -2.6% 3.0%
Australian Listed Property S&P/ASX 200 A-REIT Index 0.6% 0.6% -22.8%
Australian Fixed Interest Bloomberg AusBond Composite Index 0.4% 0.4% 3.6%
Australian Cash Bloomberg AusBond Bank Bill Index 0.0% 0.0% 0.7%
Currency AUD/USD 3.5% 3.5% 4.4%

Returns are for periods to 31 July 2020. Past performance is not an indication of future performance.