July market update – Prospect of a trade war dominated headlines

The prospect of an escalating trade war dominated the headlines in July, as President Trump looked to implement new tariffs on Chinese imports and both sides failed to blink, widening their potential range of targets. However, risk assets remained in favour, with a positive start to the earnings season in Europe and the US driving equity market returns.

What happened in the markets?

• US equities were notably strong over the month, against a solid macroeconomic backdrop that saw the first reading of the second quarter GDP rise to +4.1% annualised
• UK large caps and European equities were also positive in July, with financials contributing positively across markets at the sector level, as bond yields rose on expectations of monetary policy changes by the Bank of England and Bank of Japan
• Asian and Emerging Market equities recovered some of their second quarter losses despite the heightened trade tensions and weakness in commodity markets

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