July Review 2024
UK
U.K. inflation remained steady at its 2% target, unchanged from June, 0.1% higher than the forecast 1.9%. The U.K. economy continued performing well over the course of July, with GDP reporting 0.4% growth; far greater than the 0.2% forecast but shy of the 0.6% reported in June. The FTSE100 extended its rally logging a 3.04% gain up to 8,368 for the end of July, in contrast to the 1.78% gain recorded by MSCI World Index. The Bank of England finally cut interest rates by 25 basis points to 5%, in an attempt to further stimulate the economy. Prime Minister Keir Starmer settled into 10 Downing Street after winning the general election, announcing his plans for economic growth alongside Chancellor Rachel Reeves, his tenure has so far been misguided as he is forced to focus on law and order following an eruption of protests across the country.
Europe
The European Central Bank kept interest rates unchanged at 3.75% in July. ECB President Christine Lagarde signalled that a further rate-cut at the next meeting in September was ‘wide open’ after the eurozone’s economic prospects were downgraded and inflation was forecast to continue falling.
US
US Labour market figures for July continued rising coming in a further 0.1% higher than forecast at 4.1% vs 4% in June. Concerns of a hot US labour market have been growing in recent months with August’s latest figures of 4.3% spooking the market. This has translated into strong market demand for the Federal Reserve to begin cutting rates from 5.50% at the next meeting after a familiar stonewalled response at their meeting on July 31st. The annual US inflation reading printed at 3%, logging a marked decrease of 0.3% from June’s figures.
Equity Markets
In the capital markets, Apple and Microsoft were both removed from their observer roles on the board of OpenAI amidst the growing scrutiny by regulators of Big Tech investments in AI start-ups – preventing the tech-heavyweights from gaining insights into the cutting-edge developments in the sector.
Chairman of Revolut, Martin Gilbert, praised upcoming reforms to UK listing rules, as the challenger bank at last acquired its UK banking license after wrestling for 3 years with regulators. The London based fin-tech is seeking a valuation of up to $45bn for its Initial Public Offering.
Earnings season left US Stock indices down, lacklustre results from Magnificent Seven heavyweights Tesla and Google deepened a tech sector sell off as a sector rotation from growth to value stocks continued gaining traction.
The Bank of Japan hiked interest rates by a further 15 basis points to 0.25%, with the Japanese index, Nikkei 225, recording its worst day in 37 years. The ensuing sharp rise in JPY/USD caused a massive unwind of yen carry-trade positions which contributed to a sharp decline in US stocks.
Commodities
In the commodities sector, WTI crude prices fell by $9 from $83 to ~ $72 per barrel by the end of July, Brent Crude Oil – the international benchmark – reported a similar drop, falling by $6 per barrel from $86 to $80 over the course of the month despite rising tensions in the middle east.
Saudi Aramco bet big on the internal combustion engine remaining relevant for the foreseeable future as it took a €740M 10% stake in Horse Powertrain, a company dedicated to building fuel-based engines.
Gunvor agreed to acquire half of Varo Energy’s $600mn Dutch biofuel project, as the privately held commodity trader sought to re-invest its record profits following Russia’s full-scale invasion of Ukraine. The company reported $1.3bn in net profit last year, the second highest in its history, following a record $2.4bn in 2022.
Gold prices continued slowly rising through July, peaking at $2480 per ounce before a retracement to the $2380 level having previously reached an all-time high of $2450 per ounce in May.
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