Copper load of this

• Brent Crude Oil, which added 3.0% in US dollar terms
• Global equities, which broadly advanced with the exception of Japan. European markets led the way rising 1.5% in sterling terms

• Japanese equities, which declined 1.4% in sterling terms
• Bonds, which broadly declined. European sovereign bonds were the worst performer, down -1.6%

Tariff uncertainty continues after President Trump deferred the 9 July deal-deadline to 1 August. New trade agreements may well settle above the current 10% universal rate. From August, the US may therefore trigger an estimated $58bn more in trade taxes per year. Over a decade, this ~$600bn of income may help to plug the US government’s annual $2trn deficit between revenue and spending. However, the extension of tax cuts and the limited measures to rein in spending within Trump’s ‘one big, beautiful spending bill’ could well perpetuate this significant and possibly unsustainable shortfall.

Additionally, the price of copper surged by over 10% to a level above $5.6/lb – an all-time high. Trump stated that import taxes on copper – an important industrial metal – may hit 50%. The US imports half its copper – around 908kt a year – with 90% coming from Chile, Canada and Peru. A 50% tariff would add between $4bn and $5.4bn to its total purchase price. To avoid tariffs spilling over into manufacturing, the US would need to build new smelting facilities – with estimated costs as much as $6bn each. This seems unlikely. Trump is therefore probably using tariff threats to fast-track deals with countries trying to buy more time.

The UK economy unexpectedly shrank in May according to the latest Office for National Statistics (ONS) GDP print. A -0.1% contraction was recorded, when growth of +0.1% was anticipated by economists. Although monthly GDP figures are often volatile and prone to revision, the latest print follows a -0.3% contraction in April. A drop in manufacturing output and weak retail sales were cited as the key drivers of May’s reading. The news flow further disappointed Chancellor Rachel Reeves who has made fostering economic growth her top priority. However, there was some positive news for the Treasury as growth in March was revised upwards, further indicating that businesses brought forward activity ahead of the imposition of US trade tariffs and higher business taxes in the UK from April. Additionally, the all-important services sector continued to expand overall. The Bank of England is also expected to resume its interest rate cutting cycle from August, with Governor Andrew Bailey suggesting the Bank could be prepared to cut more if there are sustained signs of slowing in the jobs market. Nevertheless, slowing economic growth over the second quarter of the year means Reeves is faced with the prospect of increasingly tough trade-offs come the Autumn Budget if she is to keep within her self-imposed fiscal rules. Recent U-turns on winter fuel and welfare spending cuts are likely to further erode the Chancellor’s financial buffer, meaning announcements of tax hikes in October are ever more likely. Her annual Mansion House speech, taking place this week, will be closely observed.

The Confederation of British Industry (CBI) has urged urgent action to stem the tide of firms eschewing or leaving a UK market listing. Companies choosing to list elsewhere, several public firms being taken private and investors favouring other markets in recent years have all contributed to the trend and consequently seen fundraisings from Initial Public Offerings (IPOs) on the London Stock Exchange fall significantly. CBI Chair Rupert Soames suggested a requirement for tax changes to encourage domestic investment, while also highlighting a need to cast-off any squeamishness around executive pay. Increasing the appeal of a public market listing to high quality firms and management teams, who may value the less intense scrutiny and regulation of private markets, has become a more acute challenge. Financial Services and the London Stock Exchange very much remain a real strength and important component of the UK economy, so leveraging this and ensuring ongoing global competitiveness will be key for long-term economic resilience. Rachel Reeves is expected to set out further steps the government will take to ensure UK capital markets remain globally preeminent at her Mansion House speech this week.

French President Emmanuel Macron last week became the first European leader to undertake a British state visit since Brexit. Prime Minister Starmer and Macron agreed tougher controls on migration and struck deals on defence – including nuclear cooperation – and support to Ukraine. Resetting the UK’s post-Brexit relationship with the EU in order to reduce barriers to trade was part of Labour’s 2024 election manifesto.

• NVIDIA becomes the world’s first publicly listed company to reach a $4trn market valuation
• Elon Musk launched the ‘America Party,’ aiming to challenge the Republicans and Democrats as his public spat with Donald Trump continues
• Bitcoin surpassed $120,000 to reach a record high ahead of US Congressional approval of new crypto legislation expected this week. The legislation is aimed at providing a clearer regulatory framework for digital assets
• China deflation deepens as its Producer Price Index (PPI) fell -3.6% year-on-year in June, below expectations of -3.2%, reinforcing a continued deflationary trend
• US weekly jobless claims unexpectedly dropped to 227,000 in the first week of July – a seven-week low – reflecting a trend of both subdued hiring and layoffs
• The US upped its focus on rare earth supply as the government became the largest shareholder in MP Materials Corp., operator of the nation’s only rare earth mine. This reduces reliance on China, which dominates around 70% of mining and 90% of refining

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