Financial markets were once again led by the US, where economic and corporate data continued to impress.

Retail sales, unemployment and business surveys all pointed to continued expansion for the world’s largest economy. Inflation rose to 2.9% in June, which is above the Federal Reserve’s target and further interest rate rises are expected.

US equity earnings in the second quarter were very strong. Almost 90% of companies beat expectations in July and full-year earnings-per-share (EPS) for S&P 500 firms is still tracking well in excess of 20%.

The spotlight also shone on the global trade negotiations in July. European firms received a boost following talks between the US and EU President Jean-Claude Juncker in Washington. They agreed to work together “toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods.” This, combined with a more stable oil prices, helped European equities to healthy 4.0% returns.

In the UK, equities rose a more moderate 1.3% in the month, with defensive sectors favoured by equity income managers performing the best. For example, tobacco stocks rose 8.3%, fixed line telecoms 6.6%, healthcare 4.9% and consumer goods 4.6%.

It was a better month for emerging markets buoyed by a rebound in Latin American stocks. However, trade tensions between China and the US continued, and countries with high levels of external debt (such as Turkey) struggled in the face of continued US dollar strength.

UK debt markets were broadly flat in the month. Gilt yields rose at the short end, leading to small losses (0.35%) for the index, but credit spreads tightened so corporate bond markets ended the month in the black.