Monthly Market Review - July 2025
July 2025 began on a strong note for global markets, with optimism fueled by resilient economic data, progress in U.S. tariff negotiations, particularly a new trade agreement with the EU and prospects of further rate cuts. The MSCI World Islamic Index modestly rose by 0.4%*, bringing its year-to-date (YTD) gains to 8.9%*. Meanwhile, the Dow Jones Sukuk Index advanced slightly by 0.6%*, increasing its YTD return to 4.7%*. The U.S. Dollar also stabilized after falling in previous months.
In the U.S., the S&P 500 set a fresh all-time high mid-July, supported by strong earnings and improving investor sentiment. Additionally, GDP growth rebounded to 3.0%* quarter over quarter from a contraction of 0.5%* in the previous quarter, while Inflation edged up slightly, with CPI rising to 2.7%* year over year. The Manufacturing PMI slipped to 49.8*, signaling a mild contraction. The labor market shows signs of cooling down as the jobs number for May and June was sharply lowered and unemployment rate also edged up to 4.2%*. The Federal Reserve kept interest rates unchanged in July, however, following the weak jobs data, markets are now pricing in two rate cuts by year-end.
The UK economy showed modest improvement in July, with Manufacturing PMI inching up to 48.0*, pointing to a less severe contraction. Inflation eased to 3.6%* year-over-year, offering some relief to household budgets. In the housing market, prices rebounded by 0.6% in July, as lower mortgage rates and rising wages improved affordability. The Bank of England kept its base rate at 4.25% amid a softer labor market and volatile energy prices; additional cuts remain possible if growth falters.
In the Eurozone, the economic landscape improved marginally. Annual inflation remained range bound at 2.0%*, in-line with European Central Bank’s (ECB) target, while the Manufacturing PMI came in at 49.8*, suggesting a continued slowdown in industrial activity. The ECB kept its deposit rate unchanged at 2.0%, signaling confidence in prior cuts, though policymakers remained vigilant regarding potential trade risks.
China’s economy grew 5.2%* year over year in the second quarter, however manufacturing activity, as indicated by the PMI, shrank in July from 49.7* to 49.3*. The Chinese government is expected continue rolling out stimulus measures to support the economy. While trade war and tariff concerns gradually fizzle out, overcapacity in some manufacturing sectors and a slow property market continue to be main hurdles for the Chinese economy.
Looking ahead, markets remain sensitive to policy actions, trade negotiations, and geopolitical developments. Investors are advised to stay diversified and vigilant, carefully managing portfolios in anticipation of continued volatility and evolving economic conditions.
Sources
Andrew Gray, A. S. (2025, 7 28). US and EU avert trade war with 15% tariff deal. Retrieved from Reuters: https://www.reuters.com/business/us-eu-avert-trade-war-with-15-tariff-deal-2025-07-28/
England, B. o. (2025, June 19). Monetary Policy Summary, June 2025. Retrieved from https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2025/june-2025
Federal Reserve issues FOMC statement. (2025, 7). Retrieved from Board of Governors of the Federal Reserve System : https://www.federalreserve.gov/newsevents/pressreleases/monetary20250730a.htm
Mikolajczak, C. (2025, 7 29). S&P, Nasdaq again close at record highs, trade choppy. Retrieved from Reuters: https://www.reuters.com/business/autos-transportation/sp-nasdaq-again-close-record-highs-trade-choppy-2025-07-28/
Monetary policy decisions. (2025, 7 24). Retrieved from European Central Bank: https://www.ecb.europa.eu/press/pr/date/2025/html/ecb.mp250724~50bc70e13f.en.html
Mutikani, L. (2025, 7 30). Rebound in US economic growth in second quarter masks underlying slowing trend. Retrieved from Reuters: https://www.reuters.com/world/us/rebound-us-economic-growth-second-quarter-masks-underlying-slowing-trend-2025-07-30/
Reuters. (2025, 7 31). China factory activity cools as demand abroad, at home weakens. Retrieved from Reuters: https://www.reuters.com/world/china/china-factory-activity-cools-demand-abroad-home-weakens-2025-07-31
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