Global stock markets generally climbed in July with developed markets outperforming emerging economies. The information technology sector fell at the end of the month with declines for some of the mega-cap companies that have powered the US markets in recent years. When Alphabet (formerly Google) and Microsoft posted quarterly earnings, there were concerns over whether the scale of investment into artificial intelligence will be matched by returns in the near future.

As a result the Dow Jones gained 4,41% while the S&P500 gained just 1,13% and tech-heavy Nasdaq Composite index dropped 0,75% over the month.

The consumer price index (CPI) was 3,0% in June, down from 3,3% in May. A separate measure of inflation, the personal consumption expenditures (PCE) index, declined to 2,5%, down from 2.6% in May. The first reading of US GDP growth stood at a 2,8% annualized. At the end of the month the Federal Reserve (Fed) held interest rates at 5,50% but indicated that a cut could come at the next meeting in September.

Politically a seismic shift took place as President Biden bowed out of the Presidential race and endorsed Vice President Kamala Harris as the democratic nominee. This was in a way expected as Biden's election chances against Trump had suffered a blow following a poor debate performance against his republican rival, causing democratic leaders to urge the president to abandon the race. In the first 24 hours after the endorsement, the Harris campaign raised the most money in US history from small donors.

European indices generally gained with the DAX and CAC 1,95% and 0,70% respectively. France slightly outperformed in July after underperforming in June when the French parliamentary election concluded with no political grouping achieving an outright majority. The Eurostoxx 50 on the other hand dropped 0,43%, in part because some of its largest holdings were dragged down in the aftermath of the IT sector in the US suffering a setback.

Eurozone GDP growth was 0,3% quarter-on-quarter in Q2 2024. However, Germany saw a -0,1% fall in GDP. Eurozone annual inflation for July stood at 2,6%, up from 2,5% in June. The European Central Bank (ECB) kept interest rates at 4,50% as expected. With ECB Governor Christine Lagarde saying a decision on a possible cut in September was dependent on incoming data.

UK equities performed well with the FTSE index climbing 2,50% as a Labour general election win at the start of the month helped fuel hopes for a sustained recovery in the domestic economy.

The Japanese equity market experienced high volatility during the month. It reached a historical high earlier in July but then corrected sharply. The yen strengthened from 162 yen to 150 yen against the US dollar by the end of July. As a result exporters such as autos, technology, and machinery were affected by the yen appreciation due to concerns on its negative impacts to their profits. The Nikkei index closed 1,22% lower by the end of July.

Rudy Marchant
Fund manager Primorski skladi

Monthly reports - July 2024