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July Market Commentary

By July 2, 2015February 12th, 2019No Comments

An essential part of writing this bulletin each month is making daily notes on the main business and stock market news. This month I find I have comfortably broken my record – more than six pages of notes. And as you might expect, about half of those pages are about Greece and its debts.

‘An agreement was in sight’ on the debt repayment – but then the first scheduled repayment to the IMF was missed. Greece announced that it would ‘roll-up’ June’s payments and make them all at the end of the month: but no, interior minister, Nikos Voutsis, broke ranks and baldly stated, “the money is not there and will not be given.” This inconvenient disclosure was glossed over – by both Greece and Europe – as the talks, discussions, deadlines and dramas went on. And on…

But in the event, everything – including all my notes – came down to a simple fact. Greece failed to make its scheduled repayment to the IMF on June 30th, becoming the first developed country to default on an IMF loan and joining a club including Sudan, Cuba and Zimbabwe.

Now everything hinges on the referendum called by Greek Premier Alexis Tsipras on Sunday July 5th, which is ostensibly a yes/no vote on the terms of any possible bailout and continued austerity. However, various very senior European figures are warning that a no, anti-austerity, vote will spell the end of Greece’s membership of the euro and (writing on Wednesday morning) it seems difficult to disagree with this view.

Astonishingly, the rest of the world managed to carry on working and trading during June although many leading stock markets were obviously buffeted by the uncertainty surrounding Greece.

In the UK, Chancellor George Osborne started the preparations for his second Budget of 2015, which will be on Wednesday July 8th, while David Cameron set off on a tour of Europe in search of the reforms he hopes will enable a ‘yes’ vote to succeed in the UK’s referendum on continued membership of the EU. German Foreign Minister Joschka Fischer was quick to dampen expectations, warning that the Prime Minister should not take German support for granted.

There was good news in the US with much better than expected data on jobs and bad news in China where factory output shrank for the fourth month in a row. Meanwhile, in India, Nestle were planning to destroy $50m worth of noodles…


As George Osborne has said many times, the UK can never be immune to what is happening in the rest of the world and that was certainly the case for the stock market in June. The FT-SE 100 index of leading shares fell by 7% in the month to close at 6,521, as the markets worried about a possible Greek default and the implications that might have for the rest of Europe.

Hard on the heels of the possible ‘Grexit’ came more talk of the ‘Brexit,’ with Standard and Poor’s moving its view on the outlook for the UK from ‘stable’ to ‘negative,’ citing worries about the possible exit from the EU.

The CBI however, was far more optimistic – at least at the start of the month – saying that economic activity was “up several gears.” When you look at the figures, you can see the CBI’s point of view: the number of people now in work in the UK is 31.05m – an increase of 114,000 on the previous three month period. Meanwhile, unemployment has fallen again to 1.81m and welfare spending is at its lowest level for 25 years.

By the middle of the month, the CBI had slightly backtracked, cutting its growth forecasts to 2.4% for this year and 2.5% for 2016, blaming weaker-than-expected growth in the first quarter of the year. The mood wasn’t helped when HSBC announced that it would shed 8,000 UK jobs in a round of global cost-cutting.

Elsewhere in the banking sector, George Osborne announced the sale of the Government’s remaining stake in RBS and declared that the public would shortly be invited to buy shares in Lloyds – who’d just received a £117m fine for mis-handling PPI claims. He also used his annual Mansion House speech to announce what was dubbed the ‘Micawber rule’ – committing the Government to run a financial surplus in ‘normal times.’

It was left to the Federation of Small Businesses to end the month on an optimistic note for the UK economy, stating that there had been a “robust” improvement in confidence among the owners of small businesses.


It’s difficult to start the section on Europe anywhere other than Greece, but let’s do our best.

As we’ve noted above, all European stock markets were down in June, with Germany’s DAX index falling by 4% to 10,945 and the index in France dropping by the same percentage to 4,790.

But stock markets don’t tell the full story, and there was the usual good economic news coming out of Germany. Unemployment was stable at 4.7% and year-on-year inflation was expected to be 0.3% in June, slowing the rise to 0.7% seen in May. This was due to continuing falls in energy prices, plus falls in the prices of food and services. Figures for April confirmed that Germany had posted a €22.1bn trade surplus in the month, beating market forecasts and up from €17.3bn a year previously.

Inflation in France was also at 0.3% and the unemployment rate edged down – albeit to 10.3%, still more than double that of Germany. As we have reported previously, there is also the ‘unemployment halo’ in France: 1.4m people who wish to work but who are not officially considered to be unemployed. However, the unemployment rate in France is still well below Spain (23.8% in the first quarter) and Greece, where official figures put it at 25.6%.

As we have detailed above, the key moment for Greece is Sunday’s referendum, with events now moving so quickly that whatever I write will be out of date by the time you read it. There are only so many concessions that European finance ministers can make: with the Spanish general election later this year likely to bring the equally far-left Podemos to power, they will be wary of setting a precedent of never-ending bailouts.


Good news to start the month in the US, where the Labor Department confirmed that 280,000 jobs had been added in May – the biggest monthly amount this year and officially described as ‘encouraging.’ The jobless rate crept up to 5.5%, but that is explained by there being more people looking for work.

It now looks likely that the Federal Reserve will finally raise US interest rates later this year, with September being the favoured month.

In company news, YouTube announced that it was to launch a video gaming channel as pundits predicted that E-Sports (that’s playing and watching video games) would ultimately rival American football in popularity and revenues. Away from the couch, shares in Fitbit soared, valuing the company at $4.1bn. For those of you that haven’t heard of Fitbit, the company manufacture fitness trackers that are worn on the wrist and – astonishingly for a tech company valued in the billions – already make a profit.

On Wall Street, the Dow Jones index suffered the same fate as nearly all stock markets, falling by 2% in June to finish the month at 17,620.

Far East

Early in the month, China’s Shanghai Composite index reached a seven year high, going above 5,000 for the first time since 2008. However, by the end of the month it had fallen to 4,278 – down by 7% in the month – as investors worried about too much trading being done on margins, and a glut of new issues drying up liquidity in the market. In addition, there were the worries about factory output, with the Purchasing Managers’ Index staying below 50 (which indicates growth) for the fourth month in a row.

Then again the Chinese economy must be doing something right, as figures for May confirmed the third-biggest monthly trade surplus on record. The surplus was $59.5bn, compared to $35.9 for the same period in 2014.

China also hosted the signing ceremony for the Asian Infrastructure Investment Bank (AIIB), a new international financial institution set to rival the World Bank and the Asian Development Bank. As well as China, Germany, Australia, South Korea and the UK are among the founding members.

In Japan, the stock market only fell by 2% in June, ending the month at 20,236 compared to an opening level of 20,563. At one point in the month, it touched a 15 year high of 20,809 – ironically on hopes of a solution to the Greek crisis. Away from the stock market, there was good news, with Japanese growth in the first quarter of the year being revised up to 1% from the earlier estimate of 0.6%.

The other two major markets in the Far East also fell. The Hong Kong market was down by 4% to 26,250: the South Korean index fell by 2% to end June at 2,074.

Emerging Markets

Here’s a headline we haven’t reported previously: Belgium seizes Russian assets. With the rest of Europe trembling before Vladimir Putin and his gas pipelines, Belgium went out on a limb by seizing Russian state assets after a dispute over the now-defunct Yukos oil firm. Russia claimed the act was ‘openly hostile’ and ‘crudely violated international law.’

Fortunately, the Russian stock market survived this naked aggression and was one of the few stock markets to move up in June, rising by 3% to close the month at 1,655.

The Brazilian market was also up, albeit only by 1% as it finished June at 53,081.

The Indian stock market was down just 47 points at 27,781. Perhaps not the most important news on the sub-continent, but certainly the most eye-catching (or mouth-watering, depending on your perspective) was the announcement that Nestle will destroy more than $50m worth of its hugely popular Maggi noodles, after the Indian food regulator deemed them ‘unsafe and hazardous.’ I leave you to imagine what $50m worth of noodles looks like…

And finally…

If the thought of $50m worth of noodles isn’t enough for you, then consider the problems of KFC in China. Sadly, the company founded by Colonel Sanders is having to sue three Chinese firms who have allegedly been using social media to spread rumours that KFC has been using genetically modified chickens that have eight legs and six wings.

Staying with the food theme, computer hackers in Israel have discovered how to steal data with a remote encryption device so small it can be concealed inside a piece of pitta bread. And to think I bought a Southern Fried Chicken Wrap for my lunch…