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D-PIMS Weekly Market Update - Week of 25th to 31st July 2022

Today’s Monday update:

Over the course of last week, market moving headlines were mostly related to economic matters and Ukraine:

• On Monday, Ukraine forged ahead with efforts to restart grain exports from its Black Sea ports under a deal aimed at easing global food shortages but warned deliveries would suffer if a Russian missile strike on Odesa was a sign of more to come. The Ukrainian military, quoted by public broadcaster Suspilne, said the Russian missiles did not hit the port's grain storage area or cause significant damage. Kyiv said preparations to resume grain shipments were ongoing.

• On Tuesday, European Union countries approved a weakened emergency EU proposal to curb their gas demand, with opt-outs allowing them to follow different national paths to prepare for Russian supply cuts. Europe faced a further gas squeeze this week, after Russian's Gazprom said it would again slash flows through the Nord Stream 1 pipeline. With a dozen EU countries already facing reduced Russian supplies, Brussels has warned that a full cut-off is likely - and is urging countries to prepare by saving gas and storing it for winter.

• On Wednesday, better-than-expected earnings from a raft of U.S. and European companies helped steady global stock markets, cutting through gloom caused by rising interest rates and the threat of an energy crunch due to Russian gas supply cuts. Ten-year U.S. Treasury bond yields - the reference rate for global cost of capital - held near three-month lows touched on Tuesday, while several bond market recession gauges continued to flash warnings that growth in the world's largest economy is slowing, if not going into reverse.

The Federal Reserve said on Wednesday it would not flinch in its battle against the most intense breakout of inflation in the United States since the 1980s even if that means a "sustained period" of economic weakness and a slowing jobs market. As he explained the logic behind the stiffest interest rate increases in roughly four decades, Fed Chair Jerome Powell was peppered with questions about whether the U.S. economy was in or on the cusp of a recession - a notion he rejected because U.S. firms continue to hire in excess of 350,000 additional workers each month. But the 75-basis-point rate increase announced by the Fed on Wednesday, coupled with earlier actions in March, May and June, has now jacked the central bank's overnight interest rate from near zero to a level between 2.25% and 2.50%. That is the fastest tightening of monetary policy since former Fed Chair Paul Volcker battled double-digit inflation in the 1980s.

• On Thursday, British defence and intelligence officials said that a Ukrainian counter-offensive virtually cut off the Russian-occupied southern city of Kherson and left thousands of Russian troops stationed near the Dnipro River "highly vulnerable". Ukraine has made clear it intends to recapture Kherson, which fell to Russia in the early days of the invasion launched by Russian President Vladimir Putin on 24th February.

In central England, birthplace of the industrial revolution, factories are buzzing anew, hammering out parts for cars, planes and medical machines that used to be made in Asia. After two years of global supply-chain disruption, and with dark clouds on the horizon, manufacturers around Britain's second city of Birmingham say they are inundated with orders, helped by new and old domestic clients bringing some production back home. For decades, supplier decisions were based largely on price. But the pandemic and mounting geopolitical tensions have undermined the mass outsourcing model, prompting some buyers to build alternative production lines nearer to home, despite it being a lengthy process that can drive costs higher.

U.S. President Joe Biden and Chinese President Xi Jinping managed largely to steer clear of escalatory rhetoric on Taiwan in a Thursday call, suggesting that neither side – preoccupied with economic woes at home – wants a fresh crisis across the Taiwan Strait. Xi's warning to Biden against "playing with fire" over Taiwan, though vivid, largely mirrored his remarks from the two leaders' video meeting in November.

• Over the week, the main global stock markets were more up than down, with the US faring the best and China the worst. Over the week, all the D-PIMS portfolios had another strong positive week. The Portfolios were helped by their Natural Resources and US main market holdings.

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Past Performance is no guarantee of, or guide to future returns.

The comments made above represent our interpretation of events and market views and are in no way a guarantee of future investment performance.