Higher rates bite 

US Federal Reserve (Fed) Chair Jay Powell described the absence of an interest rate hike in June as a ‘skip’ and not a ‘pause’, as the Fed’s dotplots pointed to two further rate increases this year. Elsewhere the hikes came thick and fast in the battle against inflation. Central banks in the UK, Norway and Switzerland jacked rates up by 50 basis points, while the base rate in Turkey almost doubled to 15%. The Bundesbank chief reminded markets that inflation is a “very greedy beast”. Sharp drops in PMI data showed the impact of tightening policy.

Oil market update

The International Energy Agency (IEA) forecast 6% annual growth in oil demand in the near term, before a drastic slowdown after 2028, suggesting a ‘peak in demand in sight’. Saudi Arabia’s surprise production cut of 1 million barrels per day, aiming to counter recent softer demand, had little impact on the oil price. Surprisingly, the market’s reaction to the short-lived mutiny in Russia was also muted. Meanwhile oil giant Shell pledged to maintain its fossil fuel production at current levels until the clean energy system of the future is in place.

Tech’s green benefits

It has been noted that some ESG portfolios, whose list of holdings is dominated by the tech giants, have started to resemble the S&P 500. Recently Nvidia, the hottest tech stock of the year thanks to its enabling generative AI technology, has replaced Tesla at the top of the ESG wish list. It has certainly helped to drive the outperformance of ESG funds year to date. But why should tech stocks be a match for ESG investing? Tech companies typically have a low carbon impact, despite concerns over issues such as consumer privacy.