The Curious Incident of Economic Change:

Against a backdrop of significant economic change, July was all about growing tensions. There were continued tensions between China and the US, escalating tension between Beijing and Hong Kong, new tension over the UK and Huawei and last but not least, a tension between my son and I over the amount of ‘ipad time’ he has. 

If that wasn’t enough, the UK apparently ‘meddled’ further in Chinese affairs by making a citizenship offer to some 3m Hong Kong residents. It also duly suspended its extradition treaty with Hong Kong…

Jumping on the bandwagon, the US indicted two Chinese hackers for spying, with President Trump looking to take action against Chinese software ‘within days.’ All the while, the effects of Covid-19 continue to play out, with growing tensions rising between Russia and the UK over a stolen (?) vaccine.

Yes, July has been fun and games!

Chancellor Rishi Sunak will, no doubt, have also been feeling the heat. There were high hopes that his Summer Statement would be good news for the fight against Coronavirus. Yet the expected drop in US GDP in the second quarter was every bit as sharp as expected. The UK figures will, no doubt, follow suit when they are released. So, it is almost certain we will be seeing another round of Sunak’s stimulus measures when he unveils his Autumn Budget.

Another burden to the Chancellor’s wearisome load will undoubtedly be dealing with the ‘staggering jobs challenge’ the world now faces. Some 250m workers are currently expected to lose their jobs this year, forecasting further hard times to come. If there is one certainty about the Covid-19 crisis, it is that it has accelerated the economic changes we have long been writing about. But it does mean yet another headache for poor Sunak as the furlough scheme in the UK starts to ease down.

As far as economic change was reflected in the stock markets, it was a mixed bag for July. There were some solid performances, but the UK had a poor month. And as Covid-19 continued to rampage throughout the US, the dollar suffered its worst month for over a decade.

As always, let’s delve into the details…


On 8th July, the Chancellor delivered his greatly anticipated Summer Statement. Rolling out a ‘£30bn plan for jobs’ he insisted we would be defined ‘not by the crisis, but by how we respond to the crisis.’ 

For now, it is very much a waiting game. Rishi Sunak will almost certainly be waiting to see how the economy changes in response to his initial plans. Watching how the economy begins to recover will then undoubtedly inform the measures he unveils in his Autumn Budget. To a certain extent then, the Summer Statement has been something of a holding measure while the full picture emerges. 

The current indications are that while consumer confidence is starting to edge up, there is little confidence among small firms. More than a fifth of the UK’s small firms have expressed fears that their performance to be “much worse” over the next three months. And 75% of firms reported losses in the last three months, up 33% on the prior year. 

Meanwhile, the Bank of England insists that an “uneven” recovery is underway. There seems little doubt now that the hoped-for ‘V-shaped recovery’ was a pleasant dream. With all of the dramatic economic changes we have seen, the UK will likely continue to struggle for quite some time yet. 

As mentioned briefly above, tensions between the UK and China came to a head in July. The UK, as expected, spectacularly withdrew Huawei’s involvement in the country’s 5G network, sparking the inevitable backlash of Chinese threats of reprisals against UK companies.

So, it was an interesting month for the UK – and hardly surprising really that the FTSE-100 index of leading shares was down in the month. It was the worst-performing of all the markets we report on in this commentary. It dropped, 4% in July. 

With the dollar having its worst month in a decade, the pound rose sharply against it. It ended the month up 6%. 

Brexit & Trade Deals

Who would have thought that the ‘Brexit and Trade Deals’ section of this commentary would be one of the shortest? But with the torrent of economic changes at play on the world at the moment, I suppose, wonders will never cease to amaze!

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

You probably wonder where we’re going with this… wait for it… July was virtually a ‘curious incident’ month for Brexit and any subsequent trade deal with the EU. With all attention firmly fixed on Covid-19 (and several of the leading participants due to go on holiday no less!), August may well follow a similar trend.

The situation is this. There are now five months to go until the UK leaves the European Union. And it’s almost certain we will do so without any formal deal in place… probably. 


Europe’s leaders met on 17th July to negotiate a post-Covid-19 recovery deal. As with all things currently Covid-19 related, hopes prior to the meeting were, apparently, ‘not high.’ 

The talks spilt over into a fourth day marking Europe’s longest meeting since 2000. But eventually, the objections of the ‘frugal four’ (the Netherlands, Austria, Sweden and Denmark) were waylaid, and a deal was reached.

Some saw this as some kind of victory for closer European integration. But it was hard to drown out the noise of the sceptical voices pointing out that the North/South rift in the EU had widened and that the extra spending commitment – estimated at €1.8tn over the next seven years – was unsustainable given the expected contraction in the European economy. 

As the fallout continues to impact economic changes across the globe, it’s little surprise to report that the German economy is also experiencing a period of decline. It shrunk at its fastest rate on record in the second quarter, down 10.1% between April and June. 

The German DAX index rose just two points, closing the month at 12,313. The French market fell by 3%. 


It all started so well! The figures indicated record jobs growth as firms began re-hiring and 4.8m jobs were added. But, news of increasing cases of Covid-19, and the release of the second-quarter figures, promptly overshadowed any good news.

Suffering its worst ever fall in the April to June quarter, the GDP fell a historic 32.9%. Keeping things positive, economists had expected a fall of 34.7%. But, the fact remains that not even the Great Depression saw such a sharp contraction in the US economy. 

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

When things are down in the US section of our commentary, we can nearly always look to Tesla for a spot of colour. And they haven’t disappointed this month as they overtook Toyota to become the world’s most valuable carmaker on the back of rising shares.  

On the stock market, the Dow Jones index increased by 2% in July. Meanwhile, the S&P 500 index rose 6%. 

Far East

Leaving aside the tensions over Hong Kong, July was a tale of two companies, and the impact lockdown’s economic changed meant for them. 

Japanese carmaker Nissan has reported record losses after lockdown hindered its ‘turnaround’ times. Sales slumped a breath-taking 48% in the April to June period, with the estimated loss for the year reaching as much as £3.5bn.

It was exactly the opposite story for Samsung, in South Korea, whose sales soared. Fuelled by the demand created by working from home and homeschooling, 

the firm’s second-quarter profits were up 23% on the prior year. 

If July was bad for Nissan, it was similarly so for the wider Japanese economy, which went into recession. Also, despite Samsung’s good news, South Korea’s economic fate for July was twinned with Japan’s. With exports at their lowest level since 1963, and still accounting for 40% of South Korean economy, the country joined them in recession by the month’s end.

On the stock markets, the Shanghai Composite index rose 11%. The South Korean market rose 7%. And, the Hong Kong market rose 1%, while Japan’s Nikkei Dow index decreased 3%. 

Emerging Markets

Given the hecticness of the rest of this commentary, it was a relatively quiet month for the emerging markets we cover. The most noteworthy event came from Russia, where Vladimir Putin effectively became ‘president for life.’

In a referendum spanning seven days, some 80% of voters apparently backed an amendment to the constitution that would enable Putin to run for a further term as President. Prior legislation would have seen him stand down in 2024, but he will now be in office until 2036. To put that in its full context – Putin will be 83 at the end of his new term!

As far as the markets went, the Indian stock market increased by 8%. Brazil’s market grew to 102,912. And, the Russian stock market rose 6%. 

And finally

No one can ignore it. ‘Social distancing’ is now a way of life. It’s had a noticeable impact on everything. By no means least is the effect it has had on the sporting world.

One sporting event in July suffered from a severe lack of spectators. It was no other than July’s hot dog eating contest in the US’s Coney Island. Traditionally, people pack the beach in their thousands, cheering on their hotdog heroes.

Not this year though… 

This year, of course, social distancing was enforced, so, the contest had to be held indoors. Good news, though! There were new records set in both the men’s and women’s categories. Joey “Jaws” Chestnut swallowed an impressive 75 hot dogs in ten minutes. Meanwhile, Miki Sudo, from Connecticut, downed 48½ hot dogs to eat her way to victory. 

Speaking after the contest, Mr Chestnut pointed out, “One of the best things about this contest is the energy the audience brings. There’s been years when I don’t feel my best, and the audience pushes me.” 

Also clearly not feeling their best – though probably not from eating 75 hot dogs – were the Met Office staff who mistook a huge cloud of flying ants for rain. In a tweet, the confused Met Office wrote, “It’s not raining in London, Kent or Sussex – but our radar says otherwise.” 

Finally, figures were released during July showing what we’ve all been waiting for. We spent £40.6bn trying to cheer ourselves up during lockdown! As you might have expected, takeaway food and alcohol were high on the list. Interestingly though, Barclaycard also revealed that consumers bought an inflatable pub, a penny farthing and an antique diving suit! (???)

The latter, as you might have gathered, particularly puzzled us. Then again, with the weatherman telling you it’s going to be raining flying ants, perhaps it’s better to be safe than sorry!



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