Written by Chris Ayton
A challenging end to the week led equities into the red as investors reacted to a very weak US employment report, a decline in business sentiment in the US and a new set of tariffs announced by President Trump. The MSCI All Country World Index of global equities ended the week down -1.3%. Bonds, conversely, rallied on the economic uncertainty, with the Bloomberg Global Aggregate Index up +0.6% in GBP Hedged terms.
In the US, last week saw some of the largest technology companies release a raft of better-than-expected profit statements. In the process, Microsoft became the second US listed company after Nvidia to reach a market value of $4 trillion. To put this magnitude of a single company into perspective, FTSE-Russell state the combined market value of all 548 companies contained within the UK’s FTSE All Share Index as at end of June at just under $3.3 trillion (£2.5 trillion). With $4 trillion, you could buy all of the 548 largest listed UK businesses at their current market prices and still have $700 billion to spare!
That said, although many UK investors continue to eschew their domestic equity market, the lower valuations on offer in the UK continue to gather the attention of those seeking some diversification away from the elevated valuations in the US and the combination of a 3.5% dividend yield from the overall UK equity market, ongoing share buybacks and solid corporate profit growth, particularly in mid-sized companies, are helping propel the index higher this year. The UK equity market is up +12.5% in 2025. Takeover activity in the UK also remains robust and, in the latest example, last week we saw London-listed retirement specialist, Just Group, bid for by a Canadian group, Brookfield, for £2.4bn, a 75% premium to its pre-bid price. This means Brookfield views the company as good value even at a price 75% above where it was being priced on the UK market. This bid comes hot on the heels of Spectris, the UK precision instruments supplier, being bid for by American private equity group, KKR, at a 96% premium. Research from broker Peel Hunt last month showed the UK is on course for the biggest year of takeovers since 2021 after £74 billion of offers in the first half of 2025. While the long-term implications for the UK equity market of these UK businesses being snapped up by private and industrial admirers remains uncertain, it does validate the value on offer in certain segments of the UK market. We retain a modest overweight to UK equities within our portfolios.
Having enjoyed a bit of a renaissance this year, European equities were the laggards last week with the MSCI Europe ex-UK Index down -3.6% over the week. As the French Prime Minister called the EU’s tariff agreement with the US as a “dark day” for Europe, the German Chancellor said his country would suffer “substantial damage” from the tariffs and Italian trade associations called for compensation from the EU to make up for predicted losses, others breathed a modest sigh of relief that this was lower than the 30% previously threatened. The European index’s weekly decline was also exacerbated by one of its largest companies, weight loss drug maker Novo Nordisk, seeing its shares fall by more than 20%, after cutting its profit forecasts amid rising competition from the US. The share price of this previous market darling is now down nearly 70% from its peak last year. This should provide a stark reminder to investors that just because something is large and loved by the market doesn’t make it a safe long-term investment.
All performance figures are stated in Sterling terms, unless otherwise specified.
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