Global shares gained in July amid greater clarity on trade tariffs as the 1 August deadline approached. Emerging market shares outperformed developed markets. In fixed income, global government bond yields rose (yields move inversely to prices) amid continued unease over fiscal positions in advanced economies.
Please note any past performance mentioned is not a guide to future performance and may not be repeated. The sectors, securities, regions, and countries shown are for illustrative purposes only and are not to be considered a recommendation to buy or sell.
Global equities
Global shares gained in July with emerging market shares outperforming their developed market counterparts. Stock markets were supported by progress on tariffs, some well-received corporate earnings, and the ongoing enthusiasm for AI investments.
US
US shares gained in July amid advances for technology stocks and the emergence of some clarity on trade tariffs. The US announced tariff deals with a number of major trading partners in advance of the 1 August deadline. Additionally, the House of Representatives approved President Trump’s flagship tax and spending plans (the ‘Big Beautiful Bill’).
Information technology stocks continued their rebound from the falls suffered earlier in the year. Optimism over the potential of AI powered related stocks higher. Several technology stocks also posted some well-received quarterly earnings during the month. Meanwhile, there was an agreement by the US that semiconductor companies could resume shipments of some key advanced processors to the Chinese market.
Elsewhere, some more defensive sectors – including healthcare and consumer staples – underperformed during July.
The US economy grew at an annualised rate of 3% in Q2, according to data from the Bureau of Economic Analysis, rebounding from the -0.5% contraction in Q1. The Q1 figure had been affected by a sharp rise in imports amid worries over potential trade tariffs.
Data for June showed that US annual inflation (as measured by the consumer price index) had climbed to 2.7%, up from 2.5% in May, as increased tariffs began to be reflected in prices. The Federal Reserve (Fed) left interest rates unchanged at 4.25% – 4.50% at its July meeting.
Eurozone
Eurozone shares, as measured by the MSCI EMU index, advanced in July amid relief on tariffs as well as some positive corporate earnings updates. Top performing sectors in the month included healthcare and financials. Healthcare stocks received a lift from some positive corporate earnings, as well as relief on tariffs. Among financials, several European banks delivered positive earnings releases.
The information technology sector was among the weakest sectors amid disappointing quarterly earnings updates and outlook statements from some large European software and semiconductor stocks.
Other underperforming sectors included real estate and utilities, which are sensitive to interest rates. The European Central Bank (ECB) held rates steady at 2% in July. ECB President Christine Lagarde had said in June that the central bank was near the end of its rate-cutting cycle.
The EU struck a deal with the US that will see tariffs of 15% imposed on EU goods being imported into the US. Shares rose in the wake of the news amid relief that a threat by President Trump to impose 30% tariffs had been avoided. Some sectors (including aircraft and aircraft parts) secured exemptions from the tariffs.
Data from Eurostat revealed that the eurozone economy grew by 0.1% in Q2 2025, a slowdown from 0.6% in Q1 but better than feared given trade uncertainty during the period.
UK
The FTSE All-Share delivered a positive return in July. Top-performing sectors included energy, healthcare, consumer staples, and telecommunications. The healthcare sector was boosted by strong earnings updates from some large pharmaceutical companies. Weaker sectors were real estate and technology. The mid-cap FTSE 250 index underperformed the large-cap FTSE 100.
UK Chancellor Rachel Reeves used her annual Mansion House speech to unveil some limited reforms to bolster the financial sector and encourage greater investment by retail customers.
Data from the Office for National Statistics (ONS) showed that UK inflation rose to 4.1% year-on-year in June, up from 4.0% in May. Separately, ONS data also showed that the UK government borrowed £20.7 billion in June, more than expected amid rising debt costs.
Japan
The Japanese equity market gained momentum toward month end, with the TOPIX Total Return index rising 3.2% and the Nikkei 225 up 1.4%. Earlier in the month, upside was limited by concerns over Japan’s Upper House election and US-Japan trade negotiations. However, the election outcome was better than feared.
During the month, Japan reached a favourable trade deal with the US, triggering a rally led by exporters and global cyclicals. Additionally, strong demand expectations for AI data centres boosted shares of related Japanese firms, particularly optical cable and component providers, contributing further to market strength amid improving investor sentiment.
Emerging markets
Emerging market (EM) equities gained in July, with the MSCI EM index ahead of the MSCI World index but behind the S&P 500 and MSCI Asia ex Japan indices. While dollar strength was a headwind for EM, strong performance from index heavyweights Taiwan, China, and Korea proved supportive.
Thailand was the top-performing index market, with the UAE and Qatar also delivering robust performance in US dollar terms. Greece outperformed, driven by strong returns from banking stocks, followed by Taiwan, China, and Korea, which all generated similar gains, ahead of the index.
In Taiwan, ongoing investor enthusiasm for artificial intelligence continued to prove supportive, as were foreign inflows into the equity market. In China, ongoing progress on US-China trade talks, as well as the “anti-involution” trade, was beneficial for market sentiment in the month. This included the US allowing some AI-chip exports to China to resume. Meanwhile, foreign equity inflows and a trade agreement with the US, which sees Korea face a 15% general tariff plus some sector-specific levies and exemptions, contributed to the Korean index market’s outperformance.
Poland and South Africa both gained in July, albeit by less than the index, while Mexico, Indonesia, and Saudia Arabia all declined in US dollar terms. India and Brazil posted the biggest losses, with both markets impacted by US trade tariff-related risks. The former faces a 25% duty from early August as well as an extra penalty given its trade relationship with Russia. Brazil has been hit with a 50% tariff, one of the highest rates the world.
Asia ex-Japan
The MSCI Asia ex-Japan index made gains in July. Tariff deals with the US were generally better-than-feared, although talks between the US and China are ongoing.
Thailand was the strongest performer in the month, followed by Taiwan, Hong Kong, and China. The end of the month saw Thailand and Cambodia reach a ceasefire agreement following a series of border clashes. Taiwanese stocks continued to benefit from enthusiasm around AI. Chinese shares drew support from the government’s “anti-involution” campaign, which aims to curb intense price competition and reduce overcapacity in certain industries.
India underperformed amid uncertainty around US tariffs. On 30 July, President Trump announced a 25% tariff on goods imported from India, as well as an extra penalty for India’s purchases of oil and weapons from Russia.
Global bonds
In July, the market’s focus was on trade negotiations and on renewed fiscal discipline concerns. This caused global government bond yields to rise (yields are inverse to price). Corporate bonds outperformed amid an improvement in economic sentiment.
The US faced conflicting pressures from tariffs and fiscal policy. President Trump signed the ‘Big Beautiful Bill’ into law, with the net impact from tax reductions, increased spending on defence and border security, and cuts to social security judged to be negative for the country’s deficit.
Meanwhile, concerns over central bank independence resurfaced, although President Trump later refuted speculation that Federal Reserve Chair Powell’s position was under threat. As expected, the Federal Open Market Committee (FOMC) left interest rates unchanged (4.00-4.25%) while the market interpreted Powell’s press conference as relatively hawkish.
In Japan, renewed fiscal concerns ahead of the upper house elections – which saw the ruling coalition lose its majority – drove Japanese government bond yields higher. The Bank of Japan kept its policy rate unchanged at 0.5% as expected, but revised up its inflation forecast, fuelling speculation over potential rate hikes.
Meanwhile, the UK gilt market endured a degree of volatility driven by political developments. The government’s concessions on welfare cuts raised doubts over fiscal discipline, particularly given uncertainty of whether the Chancellor of the Exchequer Rachel Reeves – the advocate of the strict fiscal rules – would remain in her post.
It looks like a trade war between the EU and the US has been averted. Following weeks of negotiations, a baseline tariff rate of 15% on almost all EU goods entering the US was agreed, with the EU also committing to significant spending on US military equipment and energy. Meanwhile, the European Central Bank kept interest rates unchanged for the first time in a year, with President Lagarde striking a surprisingly hawkish tone.
Corporate bond markets enjoyed a positive month, generating positive returns over government bonds. In the US, a constructive outlook and robust company earnings – which exceeded expectations, particularly in cyclical companies-drove solid performance across sectors and ratings, both for investment grade and high yield. Investment grade bonds are the highest quality bonds as determined by a credit rating agency. High yield bonds are more speculative, with a credit rating below investment grade. June’s payroll data and job opening report painted a constructive picture of the US labour market, while survey data extended further into expansionary territory.
Euro denominated corporates equally produced positive total and excess returns as spreads compressed for the third consecutive month. Performance was broad based across sectors, with life insurance and real estate investment trusts among the outperformers.
The US dollar strengthened against all other G10 currencies in July. Sentiment was positive, with strong labour market data, positive company earnings growth and expansionary survey data. News that a trade deal with the European Union had been reached also helped support the US dollar towards the end of the month.
The Japanese yen was at the weaker end of the spectrum amid political uncertainty. The upper house elections saw the ruling coalition lose its majority, although Prime Minister Shigeru Ishiba confirmed that he would remain in office.
Commodities
In commodities, the S&P GSCI Index gained in July. The energy component was strong while livestock also delivered a positive return. Precious metals were little changed overall.
Both the agriculture and industrials metals components registered negative returns for July. Within agriculture, sugar posted a gain, while zinc outperformed among industrial metals.
Please note
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
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