Global Markets Display Resilience Amid Political Uncertainty and Mixed Economic Conditions

Global growth is projected to remain steady at 3.2% for the year, with similar expectations for 2025. In the US, inflation fell below 3% for the first time in a year, with positive growth observed in value sectors like real estate, utilities, and financials. The UK’s business index rose from 51.6 in June to 54.9 in July, driven by increased international demand. The People’s Bank of China surprised markets with a 10-basis point rate cut in the seven-day reverse repo rate. Turkey saw strong performance due to a shift towards conventional monetary policy to curb inflation. Meanwhile, Brent crude oil settled at $80.84 per barrel in July. 

Highlights in the article reveal:

• Global growth is expected to remain stable at 3.2% for the year, with the same expectation for 2025.
• US inflation dropped below 3% for the first time over the past year, signalling potential economic stability.
• Trade between the UK and Germany has recovered from the post-Brexit decline, coming in at €49.5 billion.
• In July, China displayed encouraging signals to the global markets around its longer-term growth ambitions.

July proved to be another month of market resilience in anticipation of interest rate cuts. China’s economy has, however, continued to be under strain despite low interest rates. Markets continue to expect the Fed to announce a rate cut in September. Global growth is expected to remain at 3.2% for the year, with expectations having dropped to the same level for 2025.

The US economy and markets experienced uncertainty following the attempted assassination of Donald Trump on July 13th. 

These political developments dominated news throughout most of the month. US inflation dropped below 3% for the first time over the past year. US equity indices saw some fluctuations but showed continued resilience overall. Sectors in the US that recorded positive growth for the month included value sectors, namely real estate, utilities and financials.

The Dow Jones Industrial Average rose 4.5%, while the S&P 500 ticked up 1.2% for the month. The Nasdaq Composite dropped by 0.7%. The MSCI World Index saw an increase of 1.8%, while the MSCI All Country World Index increased by 1.6%. The MSCI EM Index saw an increase of 0.3% for the month, while the Nikkei 225 saw a dip of 1.2%. The STOXX All Europe ticked up by 1.5% over the month.

The UK experienced a broad increase in economic output. The construction industry grew by 1.9% as more homes were built. This uptick and economic recovery may help boost the new Labour administration. Goldman Sachs revised its growth forecast for the UK upwards to 1.2%, from 1.1%. The UK’s business index grew from 51.6 in June to 54.9 in July, highlighting the increased demand from international markets.

The European Central bank kept its policy rate on hold in July. Across the Eurozone, credit conditions have been improving, but larger increases in energy prices and goods have driven inflation higher. 

The Eurozone inflation for the year to July came in at 2.6%, up from 2.5% in June. Trade between the UK and Germany has recovered from the post-Brexit decline. Trade between the two countries came in at €49.5 billion for the first five months of the year compared to €48.2 billion in the same period in 2023. 

The People’s Bank of China implemented an unexpected 10-basis point rate cut in the seven-day reverse repo rate during the month. This led to the commercial banks following suit with a 10bp reduction in prime rates. The rate cut followed policy-setting meetings that took place, aiming to take a more stringent pro-market stance, focus on unlocking new growth drivers to strengthen the economy, and revive private sector confidence. This provides encouraging signals to the global markets on the longer-term growth ambitions of the country. 

From an emerging market perspective, Turkey performed strongly off the back of their central bank implementing a more conventional monetary policy outlook to curb inflation.

Taiwan’s equity markets fared well following positive investor sentiment on their AI capabilities and technology orders. India’s market has performed strongly regardless of the election outcome. 

Conversely, Mexico saw sell-off as a result of the election results. Ethiopia’s Central Bank has implemented a foreign exchange reform to help ease foreign currency shortages and to attract investment. The reform will include a move to a market-based exchange system. The Ethiopian Government hopes to secure over $10 billion from the IMF and World Bank to help restructure its debt. 

Brent crude oil settled at $80.84 per barrel in July. During the month, Gold saw a significant increase of 5.2%. Copper, Silver, and Platinum each decreased by 3.7%, 0.5% and 1.8% respectively. Palladium saw a larger drop of 5.0%, contrasting with its increase in June. The price of Iron Ore was down by 5.4%. The USD/ZAR exchange rate ended the month at R18.19. 

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