D-PIMS Weekly Market Update - Week of 27th June to 3rd July 2022
Today’s Monday update:
Over the course of last week, market moving headlines were mostly related to political matters and Ukraine:
• On Monday, Russia looked set for its first major sovereign default on international bonds since the Bolshevik revolution more than a century ago, as some bondholders said they had not received overdue interest on Monday following the expiry of a key payment deadline a day earlier. Russia has struggled to keep up payments on $40 billion of outstanding bonds since its invasion of Ukraine on 24th February, as sweeping sanctions have effectively cut the country off from the global financial system and rendered its assets untouchable to many investors. The Kremlin has repeatedly said there are no grounds for Russia to default, but it is unable to send money to bondholders because of sanctions, accusing the West of trying to drive it into an artificial default.
• On Tuesday, the United States imposed sanctions on over 100 targets and banned the import of new Russian gold, increasing pressure on Russia following its invasion of Ukraine in line with commitments made by the G7 this week. The U.S. Treasury Department in a statement said it imposed sanctions on 70 entities, many of which it said are critical to Russia's defence industrial base, as well as 29 people in an effort to hinder Russia's ability to develop and deploy weapons and technology used in the invasion of Ukraine.
NATO ally Turkey lifted its veto over Finland and Sweden's bid to join the Western alliance on Tuesday, after the three nations agreed to protect each other's security, ending a weeks-long drama that tested allied unity against Russia's invasion of Ukraine. The breakthrough came after four hours of talks just before a NATO summit began in Madrid, averting an embarrassing impasse at the gathering of 30 leaders that aims to show resolve against Russia, now seen by the U.S.-led alliance as a direct security threat rather than a possible adversary.
• On Wednesday, a survey showed that a growing majority of voters in Northern Ireland support the region's post-Brexit trade rules, large swathes of which the British government are currently moving to do away with. The proportion of voters who think the protocol is the most appropriate means of managing the impact of Britain's departure from the EU grew to 55% from 50% in February, the regular poll conducted for Queen's University Belfast found. It hit a previous high of 53% last October and stood at 46% when voters were polled for the first time in April 2021.
The European Commission is willing to negotiate trading arrangements for Northern Ireland with Britain, but only if talks are constructive and do not resume with an outcome already set by London, a top EU official said on Wednesday. "Our doors are open for negotiations, but it has to be constructive negotiations and it cannot be done in a way that we negotiate but the result is given in advance," Commission Vice President Maros Sefcovic told a news conference in Brussels.
• On Thursday, Russian forces abandoned the strategic Black Sea outpost of Snake Island, in a major victory for Ukraine that could loosen a Russian grain export blockade threatening to worsen global hunger. Russia's defence ministry said it had decided to withdraw from the outcrop as a "gesture of goodwill" that showed Moscow was not obstructing U.N. efforts to open a humanitarian corridor allowing grains to be shipped from Ukraine's ports. Ukraine's southern military command posted an image on Facebook of what appeared to be the island, seen from the air, with at least five huge columns of black smoke rising above it from what it described as an assault by missiles and artillery.
Russian President Vladimir Putin said on Thursday that Moscow was open to a dialogue on strategic stability and nuclear non-proliferation. Despite Russia's invasion of Ukraine, both Moscow and Washington have stressed the importance of maintaining communication on the issue of nuclear arms. The two countries are by far the world's largest nuclear powers with an estimated 11,000 nuclear warheads between them.
Ukrainian President Volodymyr Zelensky said the launching of power transmissions to Romania was the start of a process that could help Europe reduce its dependence on Russian hydrocarbons. Zelensky's comments in his nightly video message on Thursday followed an announcement by Prime Minister Denys Shmyhal that exports had started earlier in the day - with a volume of 100 megawatts - four months into Russia's war on Ukraine. The president said the start of exports was "another significant step in our movement toward the European Union".
• On Friday, Chinese President Xi Jinping said, there is no reason to change Hong Kong's "one country, two systems" formula of governance, on a rare visit to the global financial hub after swearing in the city's new leader, John Lee. Britain returned Hong Kong to Chinese rule on July 1, 1997, with Beijing promising wide-ranging autonomy, unfettered individual rights and judicial independence at least until 2047. China's critics accuse authorities of trampling on those freedoms, unavailable on the authoritarian mainland, with a sweeping national security law imposed by Beijing on the city in 2020 after mass pro-democracy protests the year before.
• Over the week, the main global stock markets mostly down, with the Far East faring the best. Bond yields fell over the week, pushing up prices, due to fears of a slowdown in global economic growth. Over the week, all the D-PIMS Portfolios were a little up, apart from Very High Risk which was flat. The Portfolios were helped by their Japan and US Smaller Company allocations.
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The comments made above represent our interpretation of events and market views and are in no way a guarantee of future investment performance.