The week that was …
Economic round-up
US and EU strike trade deal
The US and European Union ended a months-long standoff on Sunday, announcing a framework trade deal with a US tariff on all EU goods of 15% – half the 30% import tax rate president Trump had threatened to implement from Friday. US-China talks continue this week ahead of that 1 August deadline. Read more from the BBC here
IMF verdict on the UK
Chancellor Rachel Reeves will have to raise taxes, charge for the NHS or ditch the pensions triple lock, the IMF warned in a report on the UK economy. In ‘Article IV Consultation with United Kingdom’, it noted: “Unless the authorities revisit their commitment not to increase taxes on ‘working people’, further spending prioritisation will be required to align better the scope of public services with available resources.” Read more from the Independent here
Trump meets Powell
Donald Trump said he had a “very good meeting on interest rates” with US Federal Reserve chairman Jerome Powell during a presidential visit to the US central bank. The pair have previously clashed on the subject, with the US president piling pressure on the Fed to cut rates, despite concerns over rising inflation. Read more from the Times here
UK business sentiment
While the UK’s private sector output continued to increase in July, staffing numbers decreased at the fastest pace since February, as higher payroll costs weighed on recruitment. The S&P Global Flash UK PMI Composite Output Index registered 51.0 in July – down from a nine-month high of 52.0 in June but still in expansion territory. Read more from S&P here
UK retail sales
Retail sales volumes in the UK rose 0.9% in June – significantly above the fall of 2.8% registered in the month before, but behind analyst expectations. Food-store sales were particularly strong, with retailers reporting the warm weather had a positive effect. Read more from the ONS here
ECB rate decision
As was widely expected, the ECB kept rates on hold at 2.15% last week. Inflation is at or near its target of 2% and, noted the bank, “the incoming information is broadly in line with the governing council’s previous assessment of the inflation outlook. Domestic price pressures have continued to ease, with wages growing more slowly.” It added, though, the Eurozone economy had so far proved resilient in a challenging global environment. Read more from the ECB here
US business sentiment
US business activity picked up the pace in July, with employment growth also strong. The picture was unbalanced, however, as manufacturing conditions deteriorated while the services sector was strong. The headline S&P Global US PMI Composite Output index rose sharply from 52.9 in June to 54.6. Read more from S&P here
US employment
The number of Americans claiming jobless benefits has fallen to a three-month low, suggesting more stable market conditions. That said, the data also showed sluggish hiring has been making it harder for many laid-off workers to secure new opportunities. Read more from Reuters here
Markets round-up
UK dividends
UK companies paid out £35.1bn in total dividends in the second quarter of 2025, down 1.4% year-on-year, according to Computershare’s latest Dividend Monitor. This was better than expected, but the weaker dollar and dearth of special dividends continues to weigh on overall payouts. Read more in ‘In focus’ below
S&P’s buoyant week
The S&P 500 posted its 14th record close of the year on Friday, ending the day at 6,388.64. The rise capped a strong week for the US market, buoyed by earnings results and the latest trade developments. The more tech-heavy Nasdaq Composite also rose – its 15th record close in 2025. Read more from CNBC here
Trade deal hopes drive European markets
European stockmarkets also rose last week on hopes of the US and the EU clinching a trade agreement. The pause on reciprocal tariffs is due to end at the start of August but more positive signals had been emerging from both sides. Read more from CNBC here
Yen weakness
The Japanese yen has come under pressure against the US dollar as risk-on sentiment and widening interest rate differentials continue to take their toll. Read more from FX Street here
European corporate earnings improve
The outlook for European corporate earnings has slightly improved despite continued uncertainty on tariffs, according to the latest earnings forecasts from LSEG. European companies are now expected to report an aggregate drop of 0.3% in second-quarter earnings. Read more from Reuters here
“Gold is a currency that cannot be printed in a world where, in recent years, central banks have proven willing to stimulate their way out of challenging situations.
Selected equity and bond markets: 18/07/25 to 25/07/25
| Markets | 18/07/25 (Close) |
v (Close) |
Gain/loss |
|---|---|---|---|
| FTSE All-Share | 4889 | 4956 | +1.4% |
| S&P500 | 6297 | 6389 | +1.5% |
| MSCI World | 4066 | 4127 | +1.5% |
| CNBC Magnificent Seven | 360 | 363 | +0.8% |
| US 10-year treasury (yield) | 4.42% | 4.39% | |
| UK 10-year gilt (yield) | 4.68% | 4.63% |
Investment round-up
Sustainable funds bounce back
Morningstar data showed global sustainable funds experienced $4.9bn (£3.7bn) in net inflows in the three months to 30 June – a “notable rebound” from the record-high $11.8bn outflows seen in the first quarter of 2025. The flows were largely driven by European investors.
Jupiter sees flows improve
Pre-tax profits at Jupiter Fund Management came in above analysts’ expectations as inflows improved. Underlying profit was £30.4m, compared with Peel Hunt forecasts of £25m.
Rathbones launches MPS
Rathbones has launched an “upgraded” model portfolio service, to be run by the multi-asset team under David Coombs. The firm said the launch would be the first in a series of “new or augmented” investment offerings following its integration of Investec W&I. Comprising seven portfolios, the new range will be available across a range of platforms.
Maven VCT dispute
The board of Maven Renovar VCT has hit back at Amati Global Investors, its former investment manager, arguing it lost almost 10% of the current market capitalisation of the trust on three holdings. The claims are part of an ongoing dispute between Amati and the trust’s board.
Pensions industry rethinks value framework
The pension sector may start to shift from cost to value as part of the ‘Pound for Pound’ initiative. The Department for Work and Pensions, Financial Conduct Authority, The Pensions Regulator and workplace pension providers came together last week to discuss the value-for-money framework and explore how the UK pensions market could move beyond cost-based comparisons towards broader value-based metrics.
… and the week that will be
Tariff deadline looms
President Trump’s 1 August deadline for reciprocal tariffs ticks round on Friday. The announcement of a deal between the US and European Union over the weekend should help to maintain the unusual calm of a US stockmarket that has set a string of all-time highs but now faces another week of earnings announcements. Read more from Reuters here
US rates decision
The Federal Reserve is expected to hold firm on US interest rates this week, in spite of continuing pressure from president Trump. With the economy still buoyant and inflationary pressures still high, there is little urgency for a cut. Markets will, however, be watching Fed chair Powell’s comments closely for any signs cuts may start in September. Read more from Investopedia here
The week in numbers
US rates decision: Following its meeting this week, the Federal Reserve is widely expected to leave US interest rates unchanged at 4.5%.
Eurozone inflation: Consensus expectations are for prices to rise 1.8%, year on year, and fall 0.2%, month on month, in July.
US consumer sentiment: Consensus expectations are for the US Consumer Confidence index to rise from 93 to 95 in July.
German GDP: Consensus forecasts have German GDP growing at 0.1%, quarter on quarter, down from 0.4%; and at 0.1%, year on year, up from 0%.
Eurozone GDP: Consensus forecasts have Eurozone GDP growing at 0.1%, quarter on quarter, down from 0.6%; and slowing to 0.1%, year on year, down from 1.5%.
China business sentiment: Expectations are for China’s manufacturing PMI to move back into expansion territory in July – at 50.2, from 49.7. The non-manufacturing index is also forecast to rise – from 50.5 to 50.8.
US business sentiment: Consensus expectations are that the US ISM Manufacturing PMI for July will show activity improving slightly, though remaining in contraction territory at 49.4 – up from 49 in June.
US employment: July non-farm payrolls in the US are forecast to be 110,000, down from 147,000 last month. The country’s unemployment rate is meanwhile expected to rise to 4.2% from 4.1%.
In focus: Glistering prize
Since mid-May, the price of an ounce of gold has been in a holding pattern between $3,300 (£2,826) and $3,400. Given we have the sort of backdrop – tensions in the Middle East, erratic US policy-making and stretched fiscal deficits – that would normally serve to boost the asset’s appeal, does this suggest, following a 41% rise over the past 12 months, the gold price is now too high to offer true ‘safe haven’ characteristics?
There are plenty of signs gold could still make progress – for example, the annual Invesco Global Sovereign Asset Management study showed central banks are still buying it, with two-thirds (64%) saying they were planning to increase their reserve holdings over the next two years. This appears to be in response to geopolitical instability as well as to growing concerns around the dollar and the fiscal sustainability of the US.
Retail investors also appear upbeat. The latest quarterly data from trading and investing platform eToro found three-fifths (62%) of its users expect gold prices to rise in the next six to 12 months. It also found 45% of retail investors already hold gold positions, with over half of those initiated within the last two years. On the Hargreaves Lansdown platform, meanwhile, WisdomTree Physical Gold is still the most popular ETF for net sales, while two silver ETFs also make the top 10.
Multi-managers also continue to support a structural allocation to gold. “We hold the WisdomTree Core Physical Gold ETC to provide exposure to gold,” says David Lewis, investment manager on the independent funds team at Jupiter Asset Management. “It is an asset that has acted as a safe haven and store of value for millennia. Gold has performed strongly over the last few years on the back of resurgent central bank buying, which diversifies reserves away from the US dollar and US treasuries.”
Lewis adds: “We believe it is sensible for portfolios to have exposure to gold to access its historic status as a safe haven in a time of rising geopolitical risk and its characteristic as a store of value in an uncertain economic outlook. It is also a currency that cannot be printed in a world where, in recent years, central banks have proven willing to stimulate their way out of challenging situations – with the associated debasing of their fiat currencies versus hard assets, such as gold.”
While gold can sell off at the beginning of a market correction, it usually displays its defensive properties if markets falls are more sustained.”
For some, however, the high price is a deterrent – for example, Lucie Meagher, private client investment director at Tyndall Investment Management, offers this as a reason why the firm is considering a lower allocation.
Even so, she concedes the gold price could still go higher if geopolitical tensions escalate from here, observing: “While gold can sell off at the beginning of a market correction, it usually displays its defensive properties if markets falls are more sustained – as we observed in both the financial crisis and the sell-off during the pandemic.”
Ewa Manthey, commodities strategist at ING, also believes gold would need something extra to drive it higher from here – and that is probably going to be a nasty downturn. “The bullish drivers remain intact for gold, including central bank and safe-haven demand amid geopolitical and trade tensions,” she says. “With ETF demand cooling and net longs in gold futures declining, however, gold will need a fresh catalyst to lift it out of the current trading range.”
ING’s central scenario is the global economy will continue to prove resilient and, if this happens, gold will likely move sideways or offer limited upside – in the range of 0% to 5% in the second half of 2025. At the moment, this is where the economic indicators are pointing, with tariffs likely to increase inflation in the US and around the world, albeit not catastrophically. Economic growth has remained relatively resilient in the US and other major economies. The consensus is still for positive, if slower, growth.
As Manthey points out, though, the economy rarely performs according to consensus. “Should economic and financial conditions deteriorate, exacerbating stagflationary pressures and geoeconomic tensions, safe-haven demand could significantly increase, pushing gold 10% to 15% higher from here,” she argues. “On the flipside, widespread and sustained conflict resolution – something that appears unlikely in the current environment – would see gold give back 12% to 17% of this year’s gains.”
The weakness of the dollar has undoubtedly been a contributing factor to gold’s strength in recent months.”
In this context, it is worth noting the recent decline in the US dollar has started to reverse. Since the beginning of July, the dollar has stabilised, with the DXY index, which measures its performance against a basket of currencies, marginally up – by 0.3% – over the past month. The weakness of the dollar has undoubtedly been a contributing factor to gold’s strength in recent months.
Nevertheless, the debt burden of developed governments seems unlikely to dissipate any time soon – nor the growing geopolitical tension. The US has made its isolationist position clear and countries such as China and Russia and even those within Europe are likely to continue to want to move away from their dependence on the dollar. Gold will not be the only beneficiary of such a move but it will be one of them.
Investors would also do well to keep an eye on the difference in fortunes of gold and gold-mining equities. Gold-miners have enjoyed a strong year but they have still significantly lagged the gold price. The MSCI ACWI Sel Gold Miners index, for example, has risen 20.9% over the past 12 months – a little above the broader MSCI ACWI index, but well below that 41% rise in the gold price.
Equally, while the average price/earnings (PE) ratio for the MSCI ACWI Sel Gold Miners index is 34.7x – which looks high relative to the wider index – the forward p/e is just 13.13x, with earnings likely to be far higher as the impact of the higher gold price is felt.
Other parts of the precious metals complex are also improving – for example, over the past six months, silver is up 39.6%. Many of the platinum group metals have also had a strong run. In most cases, the mining companies have lagged the commodities price and valuations still look more attractive.
The easy wins from the rising price of gold have almost certainly already been made. An allocation to the companies that mine it and/or other precious metals, however, still has a place in a portfolio, as protection against geopolitical upheaval and continued weakness in the dollar as well as for diversification purposes.
Read more on this from ING here and from Jupiter here
In focus: Reaping the dividend
The latest Computershare Dividend Monitor showed total UK dividends falling 1.4% to £35.1bn in the second quarter of 2025, due to an absence of special dividends and a stronger pound. This might be a cause for concern yet that headline number belied strong underlying momentum, with UK dividends actually rising 6.8%, if these weakening effects are stripped out.
The strong pound took £934m off the total dividend number – however, with the decline in the US dollar losing momentum, this is less likely to be a factor in the coming quarter. As a result, Computershare is still forecasting underlying dividend growth of 2.8% for the full year, up from 1.8% last quarter – equivalent to dividends of £85.1bn.
There were notable pockets of strength too – for example, Rolls-Royce paid its first dividend since 2019, which accounted for almost a quarter of Q2 growth. Banking payouts also jumped 8.1%, while insurers also had a bumper quarter, with payouts up 15%. It was also a good time for the mid-caps, with growth of 6.7% versus 5.9% for the FTSE 100.
This means the UK retains its crown as one of the top dividend markets globally. Even after the recent strong run for the UK stockmarket, the FTSE 100 offers a yield of 3.4%, with dividend cover of 1.8x. The FTSE 250 (ex investment companies) has a yield of 3.4% and dividend cover of 1.7x. The FTSE SmallCap remains the highest-yielding UK market of all, at 3.8%.
“A small dip in payouts this year belies underlying strength masked by a stronger pound diluting the value of overseas earnings for many larger, international companies,” says Rob Morgan, chief investment analyst at Charles Stanley. “In the long run, however, currency movements tend to fade in importance compared with the compounding effects of company earnings.
“Not only is the UK market one of the highest-yielding in the world but UK businesses are executing a high level of buybacks too – a pair of powerful engines to long-term returns hiding in plain sight. Buybacks involve using earnings to reduce the share count and this process can magnify shareholder returns, complementing income generated through dividends and potentially increasing future payouts.”
UK Equity Income has been the best-performing of any UK-oriented IA sector over the year to date, with the average fund up 11.4% – only the three Europe ex UK fund groupings and Latin America have delivered a higher average return. There would appear nothing in this latest round of dividend data likely to disrupt the strength of the sector.
