August market update - Stocks push higher on trade deal optimism
- stefanl6
- Aug 8
- 4 min read
Updated: Sep 11
Global equities climbed in July as renewed hopes for trade agreements buoyed investor sentiment.
All-time highs.
Global stocks enjoyed another strong month, with several indexes hitting record levels. US markets surged, driven by the tech sector and optimism over trade negotiations. Sentiment was further lifted after the US and EU struck a trade agreement. UK shares initially faltered amid speculation that Chancellor Rachel Reeves might resign but soon recovered. The FTSE 100 later climbed to a new high as investors brushed off trade war concerns.
The US announced further trade agreements with South Korea and Japan, adding to recent deals with Britain, Vietnam and Indonesia, and maintaining a tariff truce with China.
Despite pressure from President Donald Trump, the US Federal Reserve held its benchmark rate steady. Markets are currently pricing in one cut later this year, likely in September. Meanwhile, US inflation rose to 2.7% in June from 2.4% in May, as the impact of tariffs began to feed through to consumers.
The US economy and labour market remained resilient. The economy added 147,000 jobs in June, defying fears that tariffs would dampen hiring. The unemployment rate declined to 4.1%, down from 4.2% in May. The dollar, which had its worst start to a year since 1973, has also steadied on the back of stronger data
UK inflation rises.
UK inflation rose unexpectedly to an 18-month high of 3.6% in June, up from 3.4% in May – a setback for the Bank of England, which is still expected to cut rates in August and again later this year.
GDP fell by 0.1% in May after a 0.3% contraction in April, raising fears the economy could be slowing more than anticipated following a strong start to the year.
Unemployment climbed to 4.7%, the highest in four years, while wage growth eased from 5.3% to 5%. Reeves is expected to raise taxes in the autumn Budget, though a weaker outlook and rising joblessness could make this politically difficult.
EU and US trade deal.
After months of negotiation, the EU and US agreed on a trade deal, with 15% tariffs on European exports to America – half the 30% import tax Trump had threatened. The European Central Bank (ECB) kept interest rates on hold at 2% amid ongoing uncertainty. It has already cut rates four times this year.
Eurozone inflation rose in June, returning to the ECB’s 2% target. The rate was up from 1.9% in May, the first increase since January, reinforcing the ECB’s cautious stance.
Meanwhile, China’s economy shrugged off the impact of Trump’s trade wars in the second quarter, growing by 5.2%. The world’s secondlargest economy has so far avoided a downturn, helped by Beijing’s stimulus measures and a trade truce with the US. Exports rose 5.8% in June as firms took advantage of the truce to ship goods ahead of the August deadline for a more definitive deal.
However, the Chinese economy continues to face challenges. Inflation turned positive for the first time since January, but deflationary pressures continue to cast a shadow. Despite efforts to stimulate the economy, weak domestic demand is still dragging on growth.
Market-moving events
Tariffs return to the spotlight. The outcome of trade talks between the US and European
Union (EU) has reignited concerns about protectionism, with a new 15% tariff applied to most EU imports. In return, the EU has pledged to buy $750bn of US energy and invest $600bn in the US economy, along with increased defence spending. The deal is being framed as a move towards fairer trade by the US administration.
US–China talks extended. Negotiations between the US and China remain ongoing but
constructive, with both sides reportedly seeking to extend the current pause on new tariffs. The easing of tensions has supported investor sentiment, although markets remain sensitive to developments ahead of the 12 August deadline.
Stable rates, but cuts ahead. Major central banks held rates steady in July, with inflation trends largely benign across regions. The US and UK have seen inflation tick higher, but eurozone inflation is on target and Japan’s continues to decline. Markets now expect three to four rate cuts in the US and nearly three in the UK over the next year.
Mixed signals from UK data. UK GDP fell month-on-month in both April and May, though these drops appear to reflect base effects and temporary factors. Most indicators point to average demand and a steady 12-month outlook, though a softening labour market suggests a potential slowdown in economic activity, with more cuts likely from the Bank of England.
Investment highlights
Positive returns from most major asset classes. While we did not rebalance or implement
specific TAA trades in July, performance was positive across nearly all regions and asset classes. Equity markets outperformed fixed income markets, led by China, Asia Pacific ex-Japan, North America and Emerging Markets. Cyclical assets continued their bounce from the tariff-induced soft patch in early April. There were modest negative returns for government bonds and modest positive returns for corporate credit. The US dollar registered its first monthly advance this year. For now this looks like a pause in the down trend rather than a change in fortunes.
Asset allocation
Issued by Omnis Investments Limited. This update reflects Omnis and our investment management firms’ views at the time of writing and is subject to change. The document is for informational purposes only and is not investment advice. We recommend you discuss any investment decisions with your financial adviser. Omnis is unable to provide investment advice. Every effort is made to ensure the accuracy of the information but no assurance or warranties are given. Past performance should not be considered as a guide to future performance. The Omnis Managed Investments ICVC and the Omnis Portfolio Investments ICVC are authorised Investment Companies with Variable Capital. The authorised corporate director of the Omnis Managed Investments ICVC and the Omnis Portfolio Investments ICVC is Omnis Investments Limited (Registered Address: Auckland House, Lydiard Fields, Swindon SN5 8UB) which is authorised and regulated by the Financial Conduct Authority. — Approved by Omnis Investments on 1 August 2025
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