If there was one word that characterised July, it was tension. Tension between Beijing and Hong Kong, tension between China and the US, and tension between China and the UK over Huawei.

The UK made a citizenship offer to up to 3m Hong Kong residents and duly suspended its extradition treaty with Hong Kong. The US indicted two Chinese hackers for spying and President Trump is expected to take action against Chinese software, including the hugely popular TikTok, ‘within days.’

In the UK, July brought us Chancellor Rishi Sunak’s Summer Statement as he continued the fight against  We report below on a sharp drop in US GDP in the second quarter. The UK figures will also make for grim reading when they are released and we can surely expect another round of stimulus measures when the Chancellor unveils his Autumn Budget.

The Chairman of Microsoft said that the world faces a “staggering jobs challenge” with up to 250m set to lose their jobs this year. If Covid-19 has done one thing it is to accelerate economic changes we have long been writing about – another headache for Rishi Sunak as the furlough scheme in the UK starts to wind down.

World stock markets had a mixed month in July: there were some remarkably good performances, although the UK’s FTSE index had a poor month. With Covid-19 cases in the US continuing to rise, the dollar suffered its worst month for more than a decade.

As always, let us look at the details…


On 8th July – almost four months to the day after his March Budget speech – Chancellor Rishi Sunak delivered his Summer Statement.

The Chancellor announced a “£30bn plan for jobs.” The country would, he said, be defined “not by the crisis, but by how we respond to the crisis.”

As the Chancellor waits to see how the economy begins to recover before he unveils his Autumn Budget, the Summer Statement will act as something of a holding measure.

In the meantime, he will have plenty to ponder on. With the furlough scheme now gradually coming to an end, the job losses continue to mount, with 12,000 jobs going in two days at the beginning of the month and estimates at the end of July suggesting that lockdown has cost pubs and restaurants £30bn of turnover.

More worrying, perhaps, are suggestions that many firms which might otherwise have folded have been artificially kept afloat by loans and grants from the government. The rate of insolvencies has slowed since March, but the Institute of Fiscal Studies is suggesting that many of these ‘zombie companies’ will struggle to repay the new debts they have incurred.

Car production in the UK slumped to its lowest levels since 1954 and although consumer confidence edged up from its record low, confidence among small firms declined sharply. More than a fifth of the UK’s small firms expect their performance to be “much worse” over the next three months, with 75% of firms reporting that their profits fell in the last three months, up 33% on the same quarter last year.

Optimistically, the Bank of England is now suggesting that an “uneven” recovery has begun. There seems little doubt now that the supposed ‘V-shaped recovery’ will not happen, and that some sectors of the UK economy will continue to struggle for some time. The latest research is suggesting that shareholder payments via dividends could take six years to recover.

As we reported above, there were tensions between the UK and China over Huawei’s involvement in the country’s 5G network, and this led to inevitable counter charges from China and threats of reprisals against UK companies.

With all of this news, it was hardly surprising that the UK’s FTSE-100 index of leading shares fell in the month. It was the worst performing of all the markets on which we report, dropping 4% in July to end the month at 5,898.

With the dollar having its worst month for ten years, the pound rose sharply against it and ended the month up 6%, trading at $1.3098.

Brexit & Trade Deals

You may be familiar with the Sherlock Holmes story ‘Silver Blaze’ and Holmes’ famous quote that ‘the curious incident was that the dog did nothing in the night.’

July was virtually a ‘curious incident’ month for Brexit and any subsequent trade deal with the EU. With all attention still focused on Covid-19 and several of the leading participants due to go on holiday, August may well follow suit.

There are now five months to go until the UK leaves the European Union, and it is looking increasingly likely that it will be without any formal deal. In the middle of the month, the Guido Fawkes political blog reported that both major trade deals – with the EU and the US – are ‘expected to miss their deadlines and not be concluded by the end of the year.’


On 17th July, Europe’s leaders met to try and thrash out a post-Covid-19 recovery deal. Hopes prior to the meeting were, apparently, ‘not high.’

The talks went into a fourth day but – after Europe’s longest meeting since 2000 – the objections of the ‘frugal four’ (the Netherlands, Austria, Sweden and Denmark) were overcome and a deal was eventually reached.

Some hailed it as a victory for closer European integration but it is fair to say that there were also plenty of sceptical voices arguing that the North/South rift in the EU had widened and that the extra spending commitment – estimated at €1.8tn (£1.6tn) over the next seven years – was unsustainable given the expected contraction in the European economy.

We have written above about the decline in the UK car industry: sadly that is a pattern being repeated right across Europe, with German car production falling by 44% in the first five months of the year and 100,000 jobs thought to be at risk.

The German economy shrank at its fastest rate on record in the second quarter, declining by 10.1% between April and June – the sharpest fall since Germany began producing quarterly figures in 1970.

On the stock markets, it was a very quiet month for the German DAX index which rose just two points in the month to close June at 12,313. The French market fared less well, falling by 3% to end the month at 4,784.


The month started well in the US – figures showed record jobs growth in June as firms started re-hiring and 4.8m jobs were added – but all the news in the month was overshadowed by the second quarter figures.

The US economy suffered its worst ever fall in the April to June quarter, with GDP falling a historic 32.9%. You could put a positive spin on the figures by arguing that the consensus among economists had been for a fall of 34.7%, but the simple fact is that neither the Great Depression nor any other slump in the past 200 years has seen such a sharp contraction in the US economy.

The figures, “just highlight how deep and dark the hole is that the economy cratered into,” said Mark Zandi, chief economist at Moody’s Analytics.

At the end of the month, Republicans in the Senate proposed spending a further $1tn (£769bn) to help fix the ‘hole,’ with proposals including $100bn (£77bn) for schools and a stimulus payment of $1,200 (£923) to most Americans. The US has already spent more than $2.4tn (£1.85tn) in virus relief measures.

The Federal Reserve duly repeated its vow to protect the US economy, but admitted that the long term health of the economy was bound up with the long term path of Covid-19. This continued to suppress domestic demand through July as individual states imposed renewed lockdown measures.

In other news, Tesla overtook Toyota to become the world’s most valuable car maker as its shares rose again. The US stock market duly took its lead from Tesla rather than the bad economic news. The Dow Jones index was up 2% in July to 26,428 while the more broadly based S&P500 index rose 6% to 3,271.

Far East

July in the Far East – leaving aside the tensions over Hong Kong – was, perhaps, a tale of two companies and the impact lockdown had on them.

At the end of the month, Japanese car maker Nissan warned of a record loss. The company said that the virus had hindered its ‘turnaround’ efforts, with sales slumping by 48% in the April to June period. It estimated the loss for the year at £3.5bn, with its shares unsurprisingly falling 10%.

It was exactly the opposite story in South Korea as Samsung’s sales soared on the demand that has been created by working from home and home schooling. The world’s largest maker of smartphones said second quarter profits were up 23% on last year, with the results helped by strong demand for computer chips.

If the news in July was bad for Nissan, it was also bad for the wider Japanese economy, which went into recession. Household spending in May was 16.2% down on the same period in 2019, the sharpest rate of decline since comparable data began in 2001.

Despite the good news from Samsung, the South Korean economy was also in recession, with exports – which account for 40% of the economy – at their lowest level since 1963.

We have already discussed the tensions surrounding China: those don’t appear to be reflected in the Shanghai Composite index which rose 11% in the month to close July at 3,310. The South Korean market also defied the bad news, climbing 7% to 2,249. The Hong Kong market posted a more modest 1% rise, closing at 24,595 while Japan’s Nikkei Dow index was down 3% to 21,710.

Emerging Markets

It was a quiet month for news in the emerging markets we cover in the market commentary. The most noteworthy event occurred in Russia, where Vladimir Putin effectively became ‘President for Life.’

In a referendum – held over seven days because of Covid-19 – nearly 80% of voters apparently backed an amendment to the constitution which will allow Mr Putin to run for two more terms as President. He had been due to stand down in 2024, but will now effectively remain President until 2036, when he will be 83.

July was a good month for Mr Putin and a very good month for the three major emerging markets on which we report. The Indian stock market rose 8% to 37,606 and Brazil’s market was up by the same percentage to 102,912. The Russian stock market rose 6% in the month, ending July at 2,912.