Market Update - 16th July 2025

Market Update - 16th July 2025

Market performance thus far this week has been fairly muted with investors waiting in anticipation to digest a slew of economic data.

Over in Asia, Chinese exporters picked up pace in June as firms rushed to take advantage of a recent and tenuous tariff agreements between China and the United States, which saw both countries reduce tariffs at the end of the month. Customs data released on Monday showed outbound shipments from China rose by 5.8% year-on-year, exceeding the forecast of 5%, suggesting a short-term spike in external demand.

‘Reciprocal’ tariffs proposed by President Trump are set to take effect on 1st August, potentially impacting China through rules of origin complications, as goods exported via third-party countries may still face duties. Despite global trade headwinds, China’s Q2 GDP rose by 5.2%, beating forecasts and signalling resilient output. Strong growth in the first half gives authorities scope to absorb potential demand-side shocks. Retail sales, also released on Monday, showed a modest drop in household consumption versus May, suggesting softer domestic demand, although possibly also shaped by seasonal factors.

The data point everyone was watching, U.S. CPI for the month of June, showed a subdued increase in prices of 0.3%, with the 12-month inflation rate ticking up to 2.7%. Excluding volatile food and energy components, core inflation rose just 0.2% on the month, lifting the annual rate to 2.9%. Despite some headlines touting this uptick as evidence of tariffs filtering into consumer prices, the broader consensus is that this report, as a lone data point, is insufficient to support such sweeping conclusions. Notably, it still offers no clear guidance on the path of interest rates. For President Trump, the figures were soft enough to prompt a public call via social media for the Fed to cut rates. Yet the market, largely anticipating a rate hold at the Fed’s upcoming July meeting, responded ambiguously resulting in a fairly muted market reaction.

Meanwhile, a semiconductor stock rally proceeded in earnest on Wednesday following Nvidia announcing that they would resume sale of their H20 GPUs in China after U.S. policymakers suggested that export licenses would be granted. The company’s mid-tier H20 chip had previously been restricted under export rules introduced in April by President Trump’s government. By the close of trading, Nvidia shares had risen by 4%, while the tech-heavy Nasdaq finished at a fresh high.

UK headline inflation for the month of June revealed a 3.6% rise in prices versus a 3.4% growth in May. The main contributions to this figure were fuel, which did not have as big a drop as during the same period last year, and food, which increased for the 3rd consecutive month. Core inflation increased to 3.7% from 3.5%, while services inflation – which is closely watched by the Bank of England as an indicator of domestic demand shaping price pressures – held steady at 4.7%. Given that policymakers had already forecast a rise in inflation to 3.7% in the latter half of the year, it is perhaps unsurprising that UK markets opened on steady footing this morning. The FTSE 100 began the day 4.5 points higher, while gilt yields have edged upward across the curve following the announcement.

Still to come this week we have U.S. PPI, industrial production and retail sales, and UK unemployment data.

Nicola Tune, Portfolio Specialist