Market Review July


The FTSE All-Share Index advanced 2.0% in sterling terms during July. Boris Johnson triumphed in the Conservative Party leadership election and took over the reins as UK Prime Minister. Sterling weakened against all major currencies after Johnson signalled his steadfast rejection of the EU withdrawal agreement negotiated by his predecessor, including the Irish backstop. With the EU appearing unwilling to reopen the agreement, Johnson’s administration hastened preparations for a possible no-deal Brexit on 31 October. Official data suggested the UK economy grew by 0.3% in May versus the prior month as car manufacturers raised production following the sharp decline witnessed in April. Monthly UK retail sales for June beat forecasts, growing at 1%. In terms of sectors, mobile telecommunications (15.3%) led over the month, while leisure goods (-7.1%) sharply underperformed.

FTSE All-Share Total Return (TR) GBP (%)*


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The FTSE World Europe ex-UK Index gained 1.9% in sterling terms. Official data suggested the eurozone economy grew by 0.2% in the second quarter versus 0.4% in the prior quarter. Survey data on the eurozone manufacturing sector indicated activity had fallen to its lowest level in over six years in July. Germany’s Ifo Institute manufacturing business climate index also fell sharply for the month. Early estimates suggested that eurozone inflation eased to 1.1% in July versus 1.3% in June, significantly undershooting the European Central Bank’s (ECB) 2% target. Comments from ECB president Mario Draghi further raised expectations that the ECB would unveil monetary easing measures following its September policy meeting. Worries about a no-deal Brexit increased after Boris Johnson was installed as UK Prime Minister and the EU rejected his calls to scrap the Irish backstop.

FTSE World Europe ex UK TR GBP (%)*


The FTSE All-World North America Index advanced 5.4% in sterling terms over July, though most of this gain came from the significant fall in the pound over the month. The US economy grew by 2.1% in the second quarter, down from the 3.1% annual pace of the prior quarter. US manufacturing output growth picked up in June, while retail sales beat forecasts. The Federal Reserve (Fed) cut interest rates by 0.25% to 2.25%, though comments from chair Jay Powell suggested the Fed could take a wait-and-see approach over the coming months rather than enact a series of aggressive rate cuts. The Fed also announced it was ending its balance sheet reduction programme on 1 August, two months earlier than planned. While trade talks between the US and China restarted, expectations for an early breakthrough were muted.

FTSE All-World North America TR GBP (%)*

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*Source: Lipper to 28 June 2019, total return. Indices rebased to zero at 31 May 2019.

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