UK
FTSE breaches 9,000: the UK equity market performed relatively strongly during July as the blue-chip FTSE 100 Index closed above 9,000 points for the first time. Over the month as a whole, the FTSE 100 Index rose by 4.2%, boosted by a strong contribution from the mining and pharmaceuticals sectors, while the FTSE 250 Index climbed by 1.6%.
Support for UK financial services? During July, the government unveiled the “Leeds Reforms”, including measures designed to encourage UK savers to seek better returns by investing in the equity market with cash that would otherwise sit in low-interest savings accounts. Elsewhere, in the annual Mansion House speech, Chancellor of the Exchequer Rachel Reeves urged regulators “not to bend to the temptation of excessive caution”, observing: “For too long, we have presented investment in too negative a light, quick to warn people of the risks, without giving proper weight to the benefits.”
Possible changes to lending rules: as part of its response to the government’s call to identify areas where the UK’s financial sector could contribute more to sustainable growth without compromising stability, the Bank of England’s (BoE’s) Financial Stability Report recommended allowing lenders to increase lending to borrowers with higher loan-to-income ratios.
“A little weaker and more uncertain”: the BoE warned that uncertainty around the global outlook had increased, and that the UK growth prospects had become “a little weaker and more uncertain”. The UK economy shrank by 0.1% during May, dampened by a decline in manufacturing activity. The annualised rate of UK inflation rose from 3.4% in May to 3.6% in June, stoked by higher transport costs, and reaching its highest level since January 2024. Business confidence remains weak, according to the British Chambers of Commerce (BCC); sentiment has been undermined by rising employment costs alongside worries about taxation and inflation. The BCC urged the government to rule out any further business taxes in the autumn Budget. Meanwhile, GfK’s consumer confidence index found that sentiment deteriorated during July amid concerns over the possibility of tax increases.
An increasingly attractive destination? The UK’s relatively low 10% tariff deal with the US appears to have boosted its attractiveness as a destination for investment: according to Deloitte’s Q2 survey of chief financial officers, the UK was placed alongside India as the most attractive location for investment, ranking well ahead of Japan, the US and China.
Global
Tech drives US: US markets were boosted in July by better-than-expected corporate earnings for the second quarter. In particular, strong earnings from the technology sector – including Microsoft – drove markets higher: the Nasdaq Index rose by 3.7% over the month, while the Dow Jones Industrial Average Index edged up by 0.1%. The S&P 500 Index posted ten new closing highs during July, prompting speculation over the possibility of a ‘bubble’.
Tariffs continue to garner headlines: early in July, President Trump delayed plans to impose higher levies on imports into the US, announcing a new deadline of 1 August. He subsequently announced a raft of fresh tariffs at the end of July, including levies of 50% on Brazil, 35% on Canada, 25% on South Korea, and the lowest rate of 10% on the UK. Meanwhile, Congress passed President Trump’s controversial “One Big Beautiful Bill”, which was subsequently signed into law on 4 July.
The EU and Japan reached trade deals with the US: the US and EU successfully reached a trade agreement: the US will levy a tariff of 15% on EU goods. European equity markets dipped in response amid concerns that the deal could curb the region’s growth. The European Central Bank left its key interest rate unchanged at 2% in July, and the Dax Index rose by 0.6% over the month. Elsewhere, Japan and the US agreed a trade deal of 15% on the import of Japanese goods to the US. The news provided support for Japanese carmakers, driving the Nikkei 225 Index to a new high. Over July as a whole, the Nikkei 225 Index rose by 1.4%.
Signs of dissent in the FOMC: the Federal Reserve (Fed) left its key federal funds rate unchanged at 4.25%-4.5%; however, two officials voted for a cut of 0.25 percentage points – the first time since 1993 that the Federal Open Market Committee has had two dissenting members. President Trump continued his criticism of Fed Chair Jerome Powell; meanwhile, Chair Powell alluded to the impact of ongoing trade uncertainty, commenting: “Changes to government policies continue to evolve, and their effects on the economy remain uncertain.” Having contracted by 0.5% in the first three months of 2025, the US economy expanded at an annualised rate of 3% during the second quarter, although this reflected a decline in imports as President Trump’s tariffs took effect.
As ever, if you have any questions regarding your investments, please do not hesitate to contact us by calling +44 (0) 7917 390 344 or emailing me at richardbrazier@culverfinancial.co.uk and we will be happy to talk to you.