Market review July 2025

In July 2025, the MSCI All Country World Index, a representative measure of global equities, increased 5.0% in sterling terms and gained 2.2% in local terms. Asia Pacific, the US and emerging markets were among the strongest regions in local currency terms, while Europe trailed. Tariff negotiations and announcements remained a key focus for markets, with news of the US striking deals with the EU, Japan and Vietnam, for example. The International Monetary Fund upgraded its global growth forecasts for 2025 and 2026 to 3.0% and 3.1%, respectively. However, the new figures still represent a slowdown from the 3.3% growth achieved in 2024¹. In fixed income, the ICE BofA Global Government Index added 1.4% in sterling terms but dropped 0.5% in local currency terms. Sterling slipped back against the US dollar.

Crude oil price futures edged higher on supply worries, amid worries that US tariff measures could reduce trade flows. European natural gas futures also moved slightly higher, in part due to supply worries.

UK equities

The FTSE 100 Index, a commonly used representative benchmark of the UK’s largest equities, added 4.3% and reached a record high mid-month. The FTSE All Share Index rose 4.0%. It was announced that UK borrowing had jumped in June on higher interest payments. Meanwhile, the UK’s annual inflation rate continued to rise, hitting 3.6% compared with 3.4% in May, on higher transport costs. The unemployment rate reached 4.7% in May, up from 4.6% in the previous month. The preliminary UK manufacturing Purchasing Managers’ Index (PMI) figure for July improved slightly but remained in contractionary territory. Conversely, the flash UK services sector PMI softened somewhat, but remained in expansionary territory. (Note that a PMI figure under 50 indicates contraction.)

Tariff negotiations and announcements remained a key focus for markets, with news of the US striking deals with the EU, Japan and Vietnam…

US equities

In US equities, the S&P 500 Index increased 5.9% in sterling terms, and 2.2% in US-dollar terms. The Nasdaq Composite Index, which has a growth focus, moved 4.1% higher in sterling and 2.6% in local terms. During the month, a trade deal was struck with the European Union and Japan among others. Meanwhile, two companies – Nvidia and Microsoft – hit US$4 trillion in market capitalisation. Towards month-end, the Federal Reserve (Fed) announced it was keeping its benchmark fed funds interest rate on hold at 4.25%-4.50%, but it pointed to something of a moderation in economic activity in recent quarters and two policymakers were in favour of a rate cut. US annual inflation was at 2.7% in June, compared with 2.4% in May, in part due to increases in food and transport costs. Annualised gross domestic product (GDP) in the second quarter came in at a preliminary level of 3.0%, compared with the 2.4% expected and the first quarter’s contraction of 0.5%. This jump was chiefly because of a drop in imports, following strong import growth in the first quarter on stockpiling ahead of April’s US tariff announcement. The closely monitored non-farm payrolls increased by 147K in June, compared with a revised 144K in May, as local government jobs were added. The early reading of US manufacturing PMI for July slumped into contraction, hitting a worse-than-expected 49.5, compared with the final reading in June of 52.9, as new orders declined. However, the flash services PMI stepped up to 55.2 from 52.9.

Europe equities

The FTSE Developed Europe ex UK Index moved up 1.2% in sterling terms, and 0.1% in local terms. The euro rose against sterling. At the country level, Germany and France were among the gainers in local currency terms, while the Netherlands declined. The announcement of a trade deal with the US limited the rise in European equities on worries that the trade tariff agreement with the US could hinder economic growth. The European Central Bank (ECB) kept interest rates on hold in July as policymakers wanted to monitor economic growth and inflation. Inflation in the eurozone stepped up from 1.9% in May, to 2.0% in June, hitting the central bank’s medium-term inflation target. The eurozone’s second-quarter GDP growth slowed to 0.1% quarter-on-quarter (q/q), compared with growth of 0.6% q/q in the first three months of 2025, amid US-related tariff uncertainty. Preliminary figures for July’s eurozone manufacturing PMI saw a seventh successive month of improvement but remained in contraction. However, the early reading of the services PMI expanded further in July.

Japan equities

The FTSE Japan Index moved 2.4% higher in sterling terms and 3.0% in yen terms. The yen lost ground against the US dollar over the month. In a unanimous decision, the Bank of Japan (BoJ) kept its short-term interest rate at 0.5% in July as it remained cautious on tightening interest rates too quickly. Annual inflation slowed to 3.3% from 3.5% – its fifth successive month of softening. Japan’s preliminary manufacturing PMI figure for July saw a worse-than-expected drop that took it back into contraction, following one month in expansionary territory, partly attributed to US tariff uncertainty. Meanwhile, the early reading of the services PMI for June stayed in expansionary territory and strengthened further.

Emerging market equities

The FTSE Emerging Index jumped 5.4% in sterling terms and 1.8% in local-currency terms. China, Korea and Taiwan were among the individual markets to advance, while India and Brazil fell back. China’s annual GDP expanded 5.2% in the second quarter of 2025, which was a slight slowdown on the rate of 5.4% in the first quarter, but just ahead of the consensus forecast of 5.1%. growth in March. Industrial production strengthened from 5.8% year on year (y/y) in May to 6.8% y/y in June helped by government support measures. Export growth improved from 4.8% y/y in May to 5.8% y/y in June, helped by a reduction in tariff tension. Meanwhile, imports returned to 1.1% y/y growth in June, compared with the drop of 3.4% y/y in May, helped by internal measures to support demand. Korea’s quarter on quarter q/q GDP growth rate hit 0.6% in the second quarter, helped by private consumption. This followed a slight contraction in the first quarter. The Bank of Korea kept its base rate at 2.5% in July as it maintained its inflation expectations at close to its target level and continued to expect subdued economic growth. In Mexico, second-quarter GDP improved to 0.7% q/q compared with 0.2% q/q growth in the first quarter and a contraction in the final quarter of 2024, helped by an improvement in the services sector.

Asia Pacific equities

The FTSE Asia Pacific ex Japan Index advanced 5.9% in sterling terms and 3.7% in local terms. At the country level, China and Taiwan advanced, while India fell back. India was weakened by worries of a 25% tariff on its exports to the US. Meanwhile, the country’s annual inflation dipped from 2.8% in May to 2.1% in June, a six-year low, as food prices continued to weaken. Indonesia saw a further 25bps reduction in its interest rate as its central bank looked to support growth, while aiming to keep stability in its currency and inflation.

Bonds

In fixed income markets, government bonds rose in sterling terms but declined in local-currency terms. In a month that the Fed kept rates on hold, in the US, the 10-year Treasury yield rose (prices fell) from 4.23% to 4.36%. US short-term yields saw a bigger jump as markets started to limit their expectations on future Fed rate cuts. The UK 10-year gilt and German bund yields rose. The UK gilt market saw a selloff, partly on weak government borrowing figures. Credit gained ground in sterling terms and broadly outperformed government bonds. Emerging market local-currency government debt gained in sterling terms but declined in local-currency terms.

Property

The FTSE EPRA Nareit Developed Index, a measure of the performance of Real Estate Investment Trusts (REITs), jumped 2.3% in sterling terms and 1.4% in local terms. Note that REITs tend to be sensitive to interest rate expectations. During the month to end-June – the latest period with available figures – the MSCI UK Monthly Property Index was up 0.6%. Rate cuts from the BoE have boosted sentiment in the UK commercial property market. The office and industrial segments have generally seen improving demand, while retail has tended to lag in recent quarters.

*All index data are shown in total return sterling.
Source: FE Analytic
¹ International Monetary Fund, World Economic Outlook update, Global Economy: Tenuous Resilience amid Persistent Uncertainty, Washington DC, July 2025