Last week was a decent one for investment markets, with global stock markets rising by about 0.7%. This came in the face of a further postponement to US trade tariffs and some disappointing UK economic growth numbers and served as a good illustration that the stock market doesn’t equal the economy! Indeed, the UK stock market posted fresh all-time highs last week!
This week the focus will be on UK economic data, US corporate earnings and, of course, developments around trade policy from the US administration!
Last week
- Global stock markets rose, with weakness in the Pound helping overseas’ returns
- The UK’s top stock market index registered a new all-time high
- UK growth numbers disappointed (but resulted in an increased chance of interest rate cuts being priced in, which helped the stock market!)
- US companies continued to show resilience: with Delta Airlines posting some decent numbers ahead of a busy week for US corporate reporting this week
- Bond markets gave up ground, with longer-dated yields selling off.
This week
- In the UK, we have inflation data out on Wednesday and employment data out on Thursday. Both will be closely watched. The employment data will include the monthly change in payrolled employees. This number has been in decline for the last 7 months (since the 30th October budget) and will inform the view of the Bank of England ahead of their 7th August meeting.
- In the US, there is inflation data due out Tuesday, Retail Sales data on Thursday and Consumer Sentiment data (US Michigan) on Friday.
- Corporate earnings also feature strongly, with key US financials including JP Morgan, Wells Fargo, Blackrock, and Citigroup all reporting on Tuesday, Bank of America, Goldman Sachs and Morgan Stanley on Wednesday and then Netflix on Thursday.
| Equities and Oil | Last week (%) | YTD (%) |
|---|---|---|
| WTI Oil | 2.3 | -4.6 |
| Global | 0.7 | 3.0 |
| UK | 1.2 | 11.0 |
| US | 0.8 | -0.7 |
| Japan | -1.5 | -0.7 |
| Europe ex UK | 1.5 | 16.5 |
| Emerging | 0.7 | 4.6 |
| Bonds, Gold and Currencies | Last week (%) | YTD (%) |
|---|---|---|
| Gold | 1.6 | 18.5 |
| Sterling Corporates | -0.3 | 3.3 |
| GBP vs Japanese Yen | 0.9 | 1.0 |
| GBP vs USD | -1.0 | 7.8 |
| UK Government Bonds | -0.5 | 1.6 |
| High Yield | -0.2 | 4.9 |
Source: Bloomberg. Currency GBP.
More details:
- Global stock markets held up well last week, returning 0.7% for UK investors. This return came despite President Trump’s 90-day tariff pause expiring on 9th Whilst some of the new levies are higher (notably Brazil), most others are comparable and there is an increased window for negotiation: the White House has issued letters to several key countries (including the EU) which allow for an extension until 1st August for trade deals to be made.
- The Pound fell by about 1% vs the US Dollar over the week on the back of weaker than expected economic data and increased trade uncertainty. This served as a tailwind for overseas’ equity returns and helped translate them back into positive territory.
- UK growth numbers for the month of May came out last week and showed a monthly decline of 0.1%. This was worse than expected (economists, as surveyed by Bloomberg had predicted modest growth of 0.1%) and followed a 0.3% contraction in April. Falls in production and construction output drove the weakness. This served to increase the chances (as implied by the bond futures markets) of interest rate cuts. The bond futures markets are now pricing in an 85% probability of an interest rate cut (to 4%) at the next Bank of England meeting on 7th
- The UK stock market posted gains of 1.2% last week and served as a timely reminder that the stock market does not equal the economy. In fact, the UK stock index clocked up a new all-time high on Thursday. This rise came on the back of some strong gains for commodity stocks (energy and materials make up just shy of 16% of the UK large cap index), airlines (rising in sympathy with Delta) and upgrades to stocks such as British American Tobacco (which constitutes 3.3% of the index).
- Delta airlines reported earnings last week (for the period ending 30th June) and their numbers beat expectations for both profits and sales. The shares rose c12.5% on the week. The key read across for markets though was the reinstatement of guidance for 2025 (reflecting increased stability) and the growth in sales of higher priced seats (reflecting a resilient consumer at the top end that can offset cost increases). US Q2 earnings season kicks off in earnest this week, with some of the big banks reporting as well as Netflix. The US stock market is poised to post its 8th consecutive quarter of positive earnings growth.
- Last week also saw Nvidia become the world’s most valuable company: becoming the first public company ever to hit a $4 trillion valuation. This underscores its central role in the Artificial Intelligence infrastructure boom, with the company forecast to generate $200bn in revenue in this fiscal year, alongside 45% earnings growth.
- UK Government bonds sold off by about 0.5% last week, whilst UK Credit markets fared slightly better (but still finished down by 0.3%). The key driver in returns last week was a modest increase in longer-dated government bond yields (which dragged down bond prices) as investors demanded greater compensation (higher rates of interest) to lend to the UK government for longer periods of time. Shorter-dated bond yields fell modestly on the week due to the increased chance of more immediate interest rate cuts being priced in.
Watch our quick video summary for a one-minute recap of the key market moves and what to watch this week.
The value of investments and the income from them can go down as well as up and you could get back less than you invested. Past performance is not a reliable indicator of future performance.
The content of this article is not intended to be or does not constitute investment research as defined by the Financial Conduct Authority. The content should also not be relied upon when making investment decisions, and at no point should the information be treated as specific advice. The article has no regard for the specific investment objectives, financial situation or needs of any specific client, person, or entity.
