In global equities, the MSCI World rose as much as 7.6% from the start of the quarter, breaking multiple record highs, before moderating slightly to end the period 7.3% quarter-on-quarter (q-o-q) higher (Q1 2021: 4.5%) on continued better-than-expected economic indicators from advanced economies, supporting the prospects of a strengthening global economic rebound. Gains however were slightly tempered by virus resurgence, and the escalating tensions between the US and its allies against China, where at the North Atlantic Treaty Organization (NATO) summits in June 2021, China was declared as a strategic challenge. Similarly, the MSCI Emerging Markets rose as high as 5.7% at the start of June, before moderating to end Q2 2021 at 4.4% q-o-q higher (Q1 2021: 1.9%). Advances in the emerging markets were also limited as sentiments wavered amid the rapid spread of a more infectious COVID-19 Delta variant and continued uneven vaccine distribution. In the US, the S&P 500 index soared to a record high, ending the quarter up 8.2% q-o-q (Q1 2021: 5.8%), as the economy continued to recover strongly, charting five consecutive months of gains since February 2021. Similarly, the Euro Stoxx 50 and the UK FTSE rose 3.7% q-o-q and 4.8% q-o-q respectively (Q1 2021: 10.3% and 3.9% respectively) on reopening optimism and brightened economic outlook. In contrast, the Nikkei 225 reversed its position from Q1 2021 and declined -1.3% q-o-q in Q2 2021 (Q1 2021: 6.3%), marred by Japan’s rising COVID-19 numbers.
Meanwhile, global bond yields mostly declined during the quarter, as investors digested a multitude of factors from higher inflation expectations, durability of economic recovery, to the US Federal Reserve's (Fed) hawkish shift in its economic projection. In the latest Federal Open Market Committee (FOMC) meeting on 15-16 June 2021, Fed members now expect two rate hikes by the end of 2023 from none in March 2021, but was later downplayed by Chairman Powell's reassurance that its stance will remain accommodative. Meanwhile, other major central banks such as the European Central Bank (ECB), Bank of England (BOE) and Bank of Japan (BOJ) retained their ultra-low interest rate policies during Q2 2021. The US Treasury 10-year yields declined by -30.2 bps q-o-q, to a three-month low of 1.44% (Q1 2021: 83.4 bps). Likewise, the UK Gilt 10-year yields dropped by -12.8 bps q-o-q to 0.72% in Q2 2021 (Q1 2021: 64.9 bps). However, the German bund 10-year yields rose by 9.4 bps q-o-q to -0.20% (Q1 2021: 27.8 bps) amid stronger inflation expectations in the region. Meanwhile in Asia, Japan's 10-year government bond yields declined, shedding -4.1 bps q-o-q to 0.05% (Q1 2021: 7.4 bps) as the BOJ extended its pandemic-relief programme beyond the current September deadline. Likewise, EM sovereign bond yields ended mostly lower during Q2 2021.
