The FTSE 100 index of leading UK company shares finished July at 6,730.11, losing 13.83 points or 0.21% during the month.
The share index has struggled to find direction recently, after reaching its 2014 peak in mid-May at 6,894.88 points, its highest level since December 1999. Analysts widely expected the FTSE 100 to exceed 7,000 points but it has been unable to exceed the 6,900 mark.
One analyst, Carlo de Casa of ActivTrades, has said the FTSE 100 could go down to 6,645-6,685 if it breaks below the 6,700 level. Concerns about tougher economic sanctions against Russia have also been holding back global stock markets.
The latest GDP figures show the size of the UK economy is now 0.2% larger than its 2008 peak. The UK economy grew by 0.8% in the second quarter of this year, according to the latest estimates from the Office for National Statistics (ONS).
The International Monetary Fund (IMF) has raised its GDP forecast for the UK for the 4th time in a row, to growth of 3.2% in 2014, exceeding its forecasts for the US at 1.7%, Germany at 1.9% and Canada at 2.2%.
Manufacturing growth in China grew at its fastest pace in more than two years in July, indicating that economic activity in the country could be stabilising. The official Purchasing Manager’s Index in the country rose from 51 in June to 51.7 in July. A reading over 50 indicates economic expansion.
By comparison, business and consumer confidence in Europe was flat in July. This suggests that a modest economic recovery recently could be flattening out. The overall Economic Sentiment Indicator (ESI) for the 18-nation eurozone edged up 0.1 point to 102.2 points in July. It fell by 0.6 points to 105.8 for the full 28-member EU.
Eurozone inflation has fallen to its lowest level since the height of the global financial crisis, with prices rising by just 0.4% in July, falling from a rise of 0.5% for the year to June. The European Central Bank (ECB) considers an inflation rate below 1% to pose a risk of deflation, a level which ECB governor Mario Draghi has previously called ‘the danger zone’.
UK price inflation, as measured by the Consumer Prices Index (CPI), rose to 1.9% in June from 1.5% in May, prompting speculation that the Bank of England could rise interest rates sooner rather than later. Inflation was pushed higher by rising food prices and delayed summer clothes sales, resulting in a five-month high for CPI inflation in June.
Interest rates remain at their historic low of 0.5%, but markets have priced in a rise to 1% by the end of 2014. However, economists are divided over the most likely timing of this move, with many expecting it to be delayed until 2015 to ensure the economic recovery is secured.
The latest Nationwide survey suggests house prices rose by just 0.1% in July, the smallest rise in the past 15 months, likely the result of stricter mortgage lending rules. Over the past year, the average house price is up by 10.6%, falling back from 11.8% the previous month. The average property price in the UK is now £188,949.
The yield on a benchmark 10 year gilt ended July at 2.61%, falling by 2.61% during the month from 2.68% at the end of June.
Brent Crude Oil Futures are currently $105.89 a barrel, the Forex Gold Index is $1,285.25/ounce and the Silver Index is $20.69/ounce.
£1 will buy $1.68740 or €1.26090.
