July was the month that football was coming home…and then headed to France. It was also the start to one of the hottest, long lasting spells of warm weather which we are seemingly both enjoying and hating at the same time. One thing that seems to be certain is that the “Beast from the East” (do you remember when you were last really cold?) had a negative impact on the first quarter’s GDP figures, whilst the current hot spell and the world cup seems to be providing some much needed cheer, with the Centre for Retail Research (CRR) estimating that it could be worth £2.7bn to the economy.
Continuing Trump-anomics dominated the headlines with the threat of a trade war between the US and China simmering throughout the month, and then at the end of July President Trump ramped up the tension with proposals of a 25% tariff on $200bn (£152bn) of Chinese imports. China has already placed retaliatory tariffs on some American imports in response to the first wave of “Trump Tariffs” and will surely do the same to counter this latest move. Moody’s, the credit ratings agency, warned that there could ultimately be tariffs on 5% of total world imports if the trade war continues to escalate.
Ultimately the markets showed resounding resilience over July, with all but 2 of the markets on our watch list in positive territory.
UK
Although our world cup hopes were dashed by a country which didn’t exist in 1966 there was still plenty to get excited about (there just wasn’t a shiny trophy at the end of it).
As mentioned above, the real economic benefit of the world cup is estimated to be in the billions with each goal being worth £165.3m to the retail and £33.2m to the hospitality industry according to director of the Centre for Retail Research. I have no idea how they estimate these things, but it’s nice to see these sectors getting a shot in the arm – especially as my notes are usually littered with the doom and gloom that they suffer.
Unfortunately, the doom and gloom wasn’t completely missing with both Poundworld and Mothercare announcing plans to close stores, However, it was still an overall more positive month for the UK. The Governor of the Bank of England, Mark Carney, echoed the sentiments about rising household spending, and said that he had “greater confidence” that the poor performance in the first quarter of the year was down to the weather. This did however mean that interest rates were increased within the first few days of August – more on that next month!
July was also a very exciting Brexit month, with Theresa May presenting her vision of Brexit that went down so well that Boris Johnson and David “Brexit Bulldog” Davis resigned immediately afterwards. Mrs May has now taken personal ownership of Brexit and is spending the summer recess on a walking holiday in Italy and Switzerland (I just hope the words “election” aren’t mentioned) as well as going on a charm offensive with various EU heads of state. French President, Emmanuel Macron, headed to his holiday retreat at Fort Bregancon and invited Theresa May to visit him there. She cut short her walking holiday to accept the invitation, apparently hoping to get Macron’s support for her Chequers proposals. With the bookies suggesting that both a hard and soft exit are equally possible. I really hope this exercise means we take some significant steps toward resolving the issues to everyone’s satisfaction.
Ah well…only 8 months to go.
The FTSE-100 index of leading shares was up slightly in the month with a rise of 1.52% and the FTSE-All share up 1.29%
Europe
Brexit aside, July was an unusually quiet month in Europe – so goodness only knows what the traditional holiday month of August will bring.
The month did see the European parliament reject an overhaul of the copyright laws, which had sparked a fierce debate between the internet giants and content creators, the latter fearing increasing infringement of their copyright and exploitation of their content. Perhaps the European parliament decided that the introduction of GDPR was enough of an administrative burden for one year?
Europe’s two major stock markets had a very good period and moved in step with each other during the month. Both the French and German markets rose by 6.92% and 5.81% respectively during July – the two best performers of the month. The Greek index was the worst performer in our list – falling 4.09% in July. Even with all the highs and lows of this index it has fallen by just 0.02% since the beginning of the year – an incredibly volatile area to invest in, certainly not for the faint of heart!
US
As in recent months, Donald Trump happened again in July.
July started on a positive note with the employment figures gaining more ground and the US economy trundled on apace. The US economy is now growing by more than 4% a year helped by strong consumer spending and a surge in exports. President Trump, not one to miss an opportunity, tweeted this was all down to him and that his policies were working.
There was some less than welcome news from Facebook which, after the dire handling of fake news and how it handled data, it warned of slower revenue growth – which promptly wiped $120bn off the value of the company. This was offset with good news coming out of the parent group of Google (Alphabet) comfortably beating expectations on the value of its ad sales.
But let’s get back to Donny – July was all about him and his “war on trade”. He met with Jean-Claude Juncker which seems to have calmed things down between the US and EU, but this was never the real target for President T – there was no let up between the US and China. Having imposed a 25% tariff on an initial $34bn of Chinese goods in July, which naturally provoked retaliatory measures from Beijing, the President is now proposing a similar tariff on up to $200bn of imports, apparently in an attempt to force the Chinese government into trade concessions. As we will see below, the Chinese government has now taken steps to strengthen its economy against a protracted trade war – the omens do not look good and could send shock waves across the world as the No.1 and No.2 world economies seemed destined to lock horns.
The US main indices seem to be getting used to the current state of affairs, with the Dow Jones and S&P500 rising by 4.83% and 4.27% respectively.
Far East
As can probably be expected, the month opened badly for the Chinese stock market. It fell 2.5% in one day as the deadline for the first raft of Trump Tariffs arrived. However, as with so many stock markets the real damage was done in June, in the anticipation of the tariffs.
Later in the month, the Chinese government took steps to protect its economy against the possibility of a long trade war after a slight slowdown in 2nd quarter growth, introducing some tax cuts and taking steps to issue special bonds for local government infrastructure projects.
The economy had slowed slightly in the three months to June, meeting official expectations of 6.7% annualised growth, but falling slightly behind the 6.8% recorded in the first quarter.
The Chinese market fell and then recovered during the month, where it closed up 2.63%. The Nikkei 225 in Japan was up 1.12%. In contrast, the Hong Kong index was down -0.45%
Production
