Written by Dominic Williams
Global equity markets posted modest gains last week, with the MSCI All Country World Index rising by +0.4%, despite a backdrop of mixed economic data and ongoing geopolitical uncertainty.
Japan was the standout performer, with the MSCI Japan Index gaining +3.1% over the week, and the price-weighted Nikkei 225 index closing at an all-time high. This was supported by stronger-than-expected GDP growth of 0.3% in Q2, ahead of consensus forecasts of 0.1%. The positive surprise came despite the imposition of a blanket 15% tariff on Japanese exports to the US. As seen in other regions, some of the strength may reflect exporters frontloading shipments ahead of tariff deadlines. Nevertheless, we remain constructive towards the Japanese asset class, supported by ongoing corporate governance reforms aimed at unlocking shareholder value, alongside rising wage growth, which is feeding through into stronger domestic demand and consumer spending.
In the UK, GDP grew by 0.3% in Q2, beating expectations of 0.1%. This marks a slowdown from Q1’s robust 0.7% growth, which was boosted by trade activity being brought forward in anticipation of US tariffs. The Office for National Statistics (ONS) also released its latest labour market overview, which showed signs of softening. Payrolled employees fell by 149,000 year-on-year between June 2024 and June 2025, while vacancies declined by 5.8% over the latest quarter. However, we continue to treat these figures with caution, given the ONS’s ongoing challenges with low response rates and data collection issues. UK equities held up relatively well, with the FTSE All Share Index rising by +0.6% over the week.
Political developments continued to influence market sentiment in the US. Following the controversial dismissal of the previous Head of the Bureau of Labor Statistics, President Trump appointed EJ Antoni as the new head. The Bureau is responsible for key economic indicators such as the Consumer Price Index (CPI) and non-farm payrolls, which are closely watched by markets and policymakers. The latest inflation data showed headline CPI holding steady at 2.7% year-on-year in July, slightly below expectations of 2.8%. However, core inflation, which excludes food and energy, accelerated to 3.1%, its highest level in five months.
Despite this, investor sentiment remained broadly positive, buoyed by growing expectations of a Federal Reserve (the Fed) rate cut at the September meeting. A Reuters poll showed 61% of economists now anticipate a 25 basis point cut, with further easing likely before year-end. However, concerns persist over the Fed’s independence, particularly following President Trump’s public criticism of Chair Jerome Powell and the politicisation of key economic institutions. The S&P 500 Index was largely flat, rising by just +0.1% over the week.
Despite the week’s gains, risks remain. Inflationary pressures from tariffs, political interference in economic data, and uneven global growth continue to cloud the outlook. As ever, maintaining a diversified investment approach and staying invested remains the most prudent strategy in navigating an uncertain environment.
All performance figures are stated in Sterling terms, unless otherwise specified.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
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All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 18th August 2025.
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