Monthly Market Review – July 2023


Macroeconomic picture is still cloudy, although path to soft landing looks quite possible. The Fed and the European Central Bank raised their policy rates further in July meetings to combat high inflation. Further tightening is data-dependant; however, most macro analysts agree on a consensus that the monetary tightening cycle is near to its end as inflation picture is softening. The Fed chairman Jay Powell said, while announcing the policy decision on 26th July, that the Fed officials are not considering recession in 2023. However, some analysts view that the eventual trickle-down effect of high interest rates on the economy, consumers, and corporate earnings remains to be seen. Global equity markets advanced in July where most of the returns were supported by softening inflation in numerous developed markets. China’s economic growth slowed; therefore, further stimulus is most likely in the near future to support the declining economy.

Looking at the performance of major asset classes, DJ Sukuk Index was the worst performing asset in July with only 0.23% return as rising rates had an adverse impact on the fixed income markets. Amongst equity markets, DJ Islamic market index was the best performing equity indices with 3.15% appreciation in July, whilst, the US broader equity market benchmark S&P rose 3.11%. China’s Shanghai Index gained by 2.78%, while UK’s FTSE 100 index returned 2.23%. Europe’s Stoxx 600 and Japan’s Nikkei 225 were the worst performers that declined by 0.53% and 0.05%, respectively. On the other hand, DJ Commodity Index soared 6.21%, while Crude oil and gold both increased by 15.8% and 2.57%, respectively. It looks the Crude oil has started to reflect the impact of production cut decision of Saudi Arabia and Russia, in addition to on-going Russia-Ukraine war, which is not a good signal for central bank’s fight to bring inflation back to 2% target.

Market Snapshot

News & Key Events in July


• Consumer price inflation in the UK dropped to 7.9% in June 2023, marking the lowest level since March 2022 and slightly below the market consensus of 8.2%, mainly due to a slump in fuel prices.

• Britain’s quarterly economic growth was confirmed at 0.1% in the first quarter of 2023, remaining unchanged from the previous three-month period.


• The annual inflation rate in the US slowed to 3% in June of 2023, the lowest since March of 2021 and compared to 4% in May and expectations of 3.1%.

• The Federal Reserve raised the target range for the federal funds rate by 25bps to 5.25%-5.5% in July 2023, in line with market expectations, and bringing borrowing costs to the highest level since January 2001.

• The US economy expanded an annualized 2.4% qoq in the second quarter of 2023, higher than 2% in the previous period.


• Annual inflation rate in the Euro Area slowed for a third consecutive month to 5.3% in July 2023 from 5.5% in June.

• The European Central Bank raised interest rates by 25 basis points on 27th July, a ninth consecutive rate hike, saying inflation is still expected to remain too high for too long despite the recent slowdown. This brought the rate on main refinancing operations to 4.25%, the highest since October 2008, and the rate on the deposit facility to an over 22-year high of 3.75%.

• Inflation Rate in Germany decreased to 6.17% in July from 6.38% in June of 2023.

• The Eurozone economy grew by 0.3% in the second quarter of 2023 after a flat first quarter.


• China’s consumer prices unexpectedly flattened in June 2023. The People’s Bank of China (PBoC) maintained lending rates at the July fixing. Central bank interest rate cuts and further easing of property controls are being considered as potential measures to address the economic challenges.

• The Chinese economy grew by a seasonally adjusted 0.8% in the second quarter of 2023, but slowed sharply from the 2.2% expansion observed in the previous quarter.


• The annual inflation rate in Japan edged up to 3.3% in June 2023 from 3.2% in May.

• The Bank of Japan (BoJ) kept its key short-term interest rate unchanged at -0.1% and that of 10-year bond yields at around 0% in its July meeting by unanimous vote.

• The annual inflation rate in Russia rose to 3.2% in June 2023 from 2.5% in May. The central bank indicated its intention to potentially raise interest rates this year with the aim of bringing prices back to its 4% target by 2024 as it predicts that inflation will likely reach 4.5%-6.5% by the end of this year.

• The Central Bank of Russia raised its key interest rate by 100bps to 8.5% in its July 2023 meeting, above market expectations of a 50bps hike, and paved the way for more rate increases in incoming decisions. It was the first-rate hike since September of 2022.

• The Bank of Canada raised the target for its overnight rate by 25bps to 5% in July 2023, as expected by markets.


Data as of 31 July 2023. This article is for information only. Please do not act based on anything you might read in this article. Past performance is not a reliable indicator of current or future returns. This article contains general information only and does not consider individual objectives, taxation position or financial needs. Nor does this constitute a recommendation of the suitability of any investment strategy for a particular investor. It is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any trading strategy to any person in any jurisdiction in which such an offer or solicitation is not authorised or to any person to whom it would be unlawful to market such an offer or solicitation.

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